Question

Let the market demand curve be QD=20-5P and the market supply curve be QS=5P-10. Let price P be measured in $/unit and let quantity Q be measured in singular units (i.e. simple count).

Solve for the inverse demand curve.

Solve for the inverse supply curve.

As best you can, graph the demand and supply curves, marked D and S, respectively. Mark the vertical and horizontal intercepts with the appropriate numerical values

Solve for the equilibrium price P* and quantity Q*, and clearly indicate the answers on your figure.

Answer 1

Equilibrium price (P*)= $ 3

Equilibrium Quantity (Q*)=5

Explanation----

Equilibrium point for a firm is determined where demand curve intersects supply curve

Algebrically-----

At equilibrium-----

Qd=Qs

20-5p=5p-10

P=$3

Putting this value in both equatios-----

Qd=20-5(3)=5

As=5(3)-10=5

See the schedule below------

P. Qd. As

0. 20. -10

3. 5. 5

4. 0. 10

See the demand curve------

See the supply curve------

Graph showing equilibrium price & equilibrium quantity-------

The above graph shows the equilibrium point E where QD=Qs

So, equilibrium quantity= 5

Equilibrium price=$3