In: Economics
Demand function is: Q = 16 – p. Supply function is: Q = -4 + p. (Show me your math)
a) What is the quantity demanded and quantity supplied at price 6? Is there an excess demand or supply?
b) What is the equilibrium price and quantity?
(a) At price = 6
Quantity demanded = 16 - 6 = 10
Quantity supplied = -4+6 = 2
Thus, there is excess demand as Quantity demanded > Quantity supplied
(b) equilibrium occurs when Quantity demanded = Quantity supplied
=> 16 - p = -4 + p
=> 2p = 20
=> p =10
=> q = 16 - 10 = 6