The widget market is competitive and includes no transaction

The widget market is competitive and includes no transaction costs. Five suppliers are willing to sell one widget at the following prices: $30, $29, $20, $16, and $12. Five buyers are willing to buy one widget at the following prices: $10, $12, $20, $24, and $29. What is the equilibrium price and quantity in this market? Please provide detailed explanation, I believe the equilibrium price is $20.00 and the quantity is 3.

Solution

Since the market for the widget is competitive, all the products are identical and hence all the firms would have to charge the same price. Since Firms 5 is offering the lowest price of $12, all the consumers will flock to it.

However, consumer 1 is willing to pay only $10. No firm is selling at this price, hence it will be left out.

Hence the equilibrium price would be $12 and equilibrium quantity 4.