Suppose the value of demand and supply curves of a Commodity-X is given by the following two equations simultaneously: Qd=200-10p""Qs=50+15p (i) Find the equilibrium quantity of commodity X. (ii) Suppose that the price of a factor inputs used in producing the commodity has changed, resulting in the new supply curve given by the equation. Qs=100+15p Analyse the new equilibrium price and new equilibrium quantity as against the original equilibrium price and equilibrium quantity.

Suppose the value of demand and supply curves of a Commodity-X is give

1.	Suppose the value of demand and supply curves of a Commodity-X is given by the following two equations simultaneously: Qd=200-10p""Qs=50+15p (i) Find the equilibrium quantity of commodity X. (ii) Suppose that the price of a factor inputs used in producing the commodity has changed, resulting in the new supply curve given by the equation. Qs=100+15p Analyse the new equilibrium price and new equilibrium quantity as against the original equilibrium price and equilibrium quantity.
Answer» Solution :Equilibrium price and equilibrium quantity are DETERMINED at a POINT where quantity demanded is equal to quantity supplied `Q_(d)=200-10p""Q_(s)=50+10P` At equilibrium: `""Q_(d)=Q_(s)` `200-10P=50+15P` 25P = 150 P = 6 Equilibrium quantity `Q_(d)=200-10P` `=200-10(6)=200-60=140`units `Q_(s)=50+15P` `50+15(6)=50+90=-140`units Equilibrium price = Rs.6 Equilibrium quantity = 140 units (ii) When price of a FACTOR input used in producing the COMMODITY has changed, resulting in a new supply curve, `Q_(s)=100+15P` New equilibrium price : `200-10P=100+15P or 25P=100` P = 4 New equilibrium quantity `Q_(d)=200-10P=200-10(4)=200-40=160` `Q_(s)=100+15P=100+15(4)=100+60=160` As equilibrium price reduced from Rs.6 to Rs.4 per unit, equilibrium quantity increased from 140 units to 160 units.