Suppose the demand and supply curves of a Commodity-X is given by the following two
equations simultaneously:
Qd = 200 – p Qs = 50 + 2p
i) Find the equilibrium price and equilibrium quantity.
ii) Suppose that the price of a factor of production producing the commodity has
changed, resulting in the new supply curve given by the equation
Qs’ = 80 +2p
Analyse the new equilibrium price and new equilibrium quantity as against the
original equilibrium price and equilibrium quantity.
i) We know, in equilibrium:
By substituting value of p in Qd, we get:
ii) When price of factor changed, the new supply curve is
To calculate new equilibrium price and quantity, we equate
By substituting the value of p in Qd, we get:
By substituting value of p in Qd, we get:
ii) When price of factor changed, the new supply curve is
To calculate new equilibrium price and quantity, we equate
By substituting the value of p in Qd, we get: