The demand function is Qd = 100 - 2P and the supply function is Qs = 20 + 2P. What is the equilibrium price?
Answer and explanation
Correct answer: B. KSh 20
- Step 1: Set Qd = Qs: 100 - 2P = 20 + 2P. Step 2. 80 = 4P, so P = 20. Answer: KSh 20. Why not the others: KSh 30: That is not the price at which the quantities are equal. KSh 40: That is not the price at which the quantities are equal. KSh 10: At KSh 10 demand exceeds supply.
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