00:01
Suppose that the demand and supply curse pizza are given by quantity demanded equals 400 minus 20 p.
00:08
And the market supply is given by quantity supplied equals 20p minus 200, where p equals the price per pizza.
00:17
A, in equilibrium, how many pizzas would be sold and at what price? so in equilibrium, quantity demanded equals quantity supply.
00:31
So let's go ahead and substitute.
00:33
Quantity demanded is 400 minus 20p equals quantity support.
00:38
Is 20p minus 200.
00:41
And now we can use algebra to solve for p.
00:44
I'm going to start by adding 20p to both sides.
00:49
I get 400 equals well negative 20p plus 20p is zero, so it falls off.
00:55
And on the right hand side, i have 20p plus 20p, which is 40p minus 200.
01:01
Add 200 to both sides.
01:03
400 plus 200 is 600 equals 40p minus 200 plus 200 plus 200 is 0 .000 is 0 .000 is 0 .000 is 0 .000 is 0.
01:10
Zero so it falls off divide both sides by 40 600 divided by 40 is 15 on the right hand side i have 40 divided by 40 which is one and so we're just left with one p which we can just write as p so this is the equilibrium price 15 so now since the quantity demanded equals quantity supplied that means the quantity on both sides is going to be the same so i can i'm going to use quantity demanded and we see 400 minus 20p and i'm going to plug the p in and i get quantity demanded equals 400 minus 20 times 15 so quantity demanded equals 400 20 times 15 is 300 quantity demanded is 400 minus 300 is 100 and i can check this by plugging in into quantity supplied as well which is 20p minus 200 quantity supplied equals 20 times 15 minus 200.
02:12
20 times 15 is 300.
02:17
So i get quantity supplied equals 300 minus 200, which is 100.
02:21
And that makes sense.
02:22
Since we said quantity demand equals quantity supplied, these two should be the same number, and they are.
02:27
So the equilibrium quantity is to 100, and the equilibrium price is 15.
02:34
What would happen if suppliers of pizza set the price of pizza at $8? so this would mean they're setting the price below the equilibrium price.
02:43
So since suppliers are setting the price at $8, which is below the equilibrium price, there's going to be an increase in demand because when price goes down, demand goes up.
03:25
And we're going to see a decrease in supply because when price goes down, companies aren't willing to supply as much because they're not going to make as much profit...