Suppose the demand and supply curves of tea are given by:
qD = 1,000 – p
qS = 700 + 2p
Calculate equilibrium price.
Answer & explanation
Correct answer: option 2
The correct answer ios Option 2: 100
At equilibrium, market supply = market demand. Equating them, we get
1000-p = 700+ 2p
1000-700 = 2p + p
300 = 3p
100 = p
Thus, the equilibrium price is 100.