Question

A first year student in economics analyzed the demand and supply for cups of tea at a staff canteen in summer and found that Q= 550- 30P and Q=50 + 20P where Quantity demanded is quantity of cups of tea

Answer 1

and P is price per cup of tea.

The student realized that in the given equations, the first equation represents the demand curve for cups of tea, and the second equation represents the supply curve for cups of tea. By setting these two equations equal to each other and solving for P, the student found the equilibrium price of a cup of tea at the staff canteen in summer to be $5.

The student also calculated the equilibrium quantity of cups of tea at the staff canteen in summer by plugging the equilibrium price back into either the demand or supply equation. The student found that at the equilibrium price of $5 per cup of tea, the quantity of cups of tea demanded and supplied is 500.

Overall, the student was able to use the basic economic principles of supply and demand to analyze the market for cups of tea at the staff canteen in summer and determine the equilibrium price and quantity.