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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 price and 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 + 15pAnalyse the new equilibrium price and new equilibrium quantity as against the original equilibrium price and equilibrium quantity. |
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Answer» (i) The basic condition for equilibrium price and equilibrium quantity is as under : Quantity demanded = Quantity supplied Qd = Qs 200 – 10p – 50 + 15p = 10p – 15p = 50 – 200 – 25/7 = – 150 P = \(\frac{150}{25}\) = ₹6 Putting the vallie of p in Qd Qd = 200 – 10p = 200 – 10 x 6 = 200 – 60 = 140 units Equilibrium price = ₹ 6 Equilibrium quantity = 140 units (ii) Quantity demanded = Quantity supplied Qd = Qs 200 - 10p = 100 + 15p – 10p – 15p = 100 - 200 - 25p = - 100 p = \(\frac{100}{25}\) p = Equilibrium price = ₹ 4 Qd = 200 – 10p = 200 – 10 x 4= 160 units Equilibrium quantity = 160 units As a result of change in supply, the equilibrium price has come down from ₹ 6 to ₹ 4 and equilibrium quantity has increased from 140 to 160 units. |
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