Let us consider the example of a market consisting of identical farms producing the same quality of wheat. Suppose the market demand curve and the market supply curve for wheat are given by: $q^D = 200 - p$ and $q^S = 120 + p$. What is the equilibrium price?

Rs. 40 per kg.

The correct answer is Option (1) → Rs. 40 per kg.

To find the equilibrium price, we set quantity demanded (qD) equal to quantity supplied (qS):

Given:

• Demand: qD = 200 − p

• Supply: qS = 120 + p

At equilibrium, qD = qS

So, 200 − p = 120 + p

200 − 120 = p + p
80 = 2p
p = 40

The equilibrium price is Rs. 40 per kg.