The market demand and market supply functions for a product are given by the following equations. QD = 100 – 3P QS = 10 + 2P Where, QD is the quantity demanded, QS is the quantity supplied and P is the price of the product a) Does the market exhibit an excess demand or excess supply at the prices 10 and 20? Explain. (1 mark) b) Draw the market demand and market supply curves for the product on a diagram (1 mark) c) What are the equilibrium price and equilibrium quantity of the product?
Added by Zomboseh V.
Step 1
At a price of 10, we can substitute P = 10 into the demand and supply equations: QD = 100 - 3(10) = 100 - 30 = 70 QS = 10 + 2(10) = 10 + 20 = 30 Since QD (70) is greater than QS (30), there is excess demand at a price of 10. At a price of 20, we can substitute Show more…
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The market demand and market supply functions for a product are given by the following equations. QD = 100 – 3P QS = 10 + 2P Where, QD is the quantity demanded, QS is the quantity supplied and P is the price of the product a) Does the market exhibit an excess demand or excess supply at the prices 10 and 20? Explain. (1 mark)
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