Question

Suppose the market demand for good A given by Qd= 300 -20 P and the market supply for Good A is given by Qs=20P-100,where P=price of Good A.
Q;Graph the supply and demand schedules for Good A using P5 through P15 as the value of P.
Q; In equilibrium, how many good A would be.sold and at what prices?
Q: what would happen if supplier set the price of goof A at P15? Explain the market adjustment process.

Answer 1

At some price P the supply just meets the demand.
Qd= 300 -20 P
=
Qs=20P-100
so
300 - 20 P = 20 P - 100
40 P = 400
P = 10
Q = 200 - 100 = 100

If P is fixed at 15 then fewer will be bought
Qdemand = 300 - 20(15)
= 300 - 300
= 0
No one is dumb enough to pay 15