The market for gravel has been estimated to have the followi

The market for gravel has been estimated to have the following supply and demand relationships: P= 100-.01Q_D P = 10 + .01Q_s Calculate the equilibrium price and quantity. The following formulas represent the demand supply curves for various goods: Q_d = 1000 - 200P Q_s = 200p -200 Q_d = 5000-10P Q_s = 40p Calculate the equilibrium price and quantity in this market and illustrate this graphically.

Solution

Equilibrium price is established where Qd = Qs

1. 100-0.1Q = 10+0.1Q

0.2Q = 90

Q = 450

P = 55 (100-0.1(450) = 55)

2 a) 1000-200P = 200p-200

1200 = 400P

P = 3

Q = 1000-200(3) = 400 units

b. 5000-10P = 40P

5000 = 50P

P = 100

Q = 5000-10(100) = 4000 units.