Consider a market consisting of two farms producing same quality of wheat. The market demand curve and the market supply curve for rice are given by:
qD = 250 - p for 0≤p≤250
= 0 for p > 250
qS = 150 + p for p ≥10
= 0 for 0≤p<10
What will be the equilibrium quantity?
Answer & explanation
Correct answer: option 2
The correct answer is option 2: 200
Since at equilibrium price market clears, we find the equilibrium price by equating market demand and supply and solve for p.
250-p = 150+ p
100 = 2p
50 = p
Putting p=50 in either demand equation or supply equation, we get q = 200.