Macroeconomics + Economy 2009 Update 18th Edition by Campbell McConnell, Sean Masaki Flynn,Stanley Brue

Exercise 20

ADVANCED ANALYSIS Assume that demand for a commodity is represented by the equation P = 10 -.2 Q d and supply by the equation P = 2 +.2 Q s , where Q d and Q s are quantity demanded and quantity supplied, respectively, and P is price. Using the equilibrium condition Q s = Q d , solve the equations to determine equilibrium price. Now determine equilibrium quantity. Graph the two equations to substantiate your answers.