Question

4(1+1/p)=p+1 what is equilibrium price

Answer 1

Answer:

I hope it will help you

Explanation:

1) Solve for the demand function and the supply function in terms of Q (quantity).

2) Set Qs (quantity supplied) equal to Qd (quantity demanded). The equations will be in terms of price (P)

3) Solve for P, this is going to be your equilibrium Price for the problem.

4) Plug your equilibrium price into either your demand or supply function (or both--but most times it will be easier to plug into supply) and solve for Q, which will give you equilibrium quantity.

When solving for equilibrium price and quantity, you need to have a demand function, and a supply function. Sometimes you will be given an inverse demand function (ie. P = 5 –Q) in this case you need to solve for Q as a function of P. Once you have both your supply and demand function, you simply need to set quantity demanded equal to quantity supplied, and solve.

This is best explained by using an example...

Suppose your monthly quantity demand function for a product is Qd = 10,000-80P, and your monthly quantity supply function for a product is Qs=20P, then we need to follow the first step outlined above and set Qd=Qs and solve for price.

1) Qd=Qs which is also equal to--

2) 10,000 – 80P = 20P

We then must add 80P to both sides, then divide by 100 to get:

100 = P

(we got the above by adding 80P to both sides which gave us 10,000=100P, then divided both sides by 100 to get 100 = P)

Which is our equilibrium price. Now to find equilibrium quantity we can plug our equilibrium price (100) into either our demand or supply function. If we plug it into our demand function we get:

Qd= 10,000 – 80*100 = 2,000

We get 2,000 because 80*100 is 8,000... and 10,000 minus 8,000 is 2,000.

If we plug it into our supply function we get:

Qs = 20*100 = 2,000