Question #110424

The demand for ice cream cones is P=1600 and Qd is 2

The supply of ice cream cones is P =400 and Qs is 1. The price of a cone is expressed in cents, and the quantities are expressed in cones per day. To find the equilibrium price (P*) and the equilibrium quantity (Q*), substitute Q* for QD and QS and P* for P. (8 marks). (FOR QD, P=a-bQd and for QS, P=c+dQS).

The supply of ice cream cones is P =400 and Qs is 1. The price of a cone is expressed in cents, and the quantities are expressed in cones per day. To find the equilibrium price (P*) and the equilibrium quantity (Q*), substitute Q* for QD and QS and P* for P. (8 marks). (FOR QD, P=a-bQd and for QS, P=c+dQS).

Expert's answer

Equilibrium point is the point at which the market will clear. The demand function based on the above question will be:

**P=1600-2Q** : The demand function has a negative slope.

The supply function will be as follows:

**P=400+Q** : The supply function has a positive slope.

The equilibrium point is the point where the quantity demanded and the quantity supplied are equal.

Therefore, equilibrium condition is as follows:

**1600-2Q=400+Q**

1600-400=Q+2Q

1200=3Q

Q=1200/3

Q^{*}=400

Equilibrium price will therefore be,

P=400+Q

P=400+400

P^{*}=800

OR

P=1600-2Q

P=1600-2*400

P^{*}=800

*Substituting with Q*^{*}* for Qd and P with P*^{* }*get**:*

P=a-2bQd

800=a-800 as the demand equation.

a=1600

P=c+dQS

800=c+400 as the supply function.

c=400

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