Suppose the demand and supply curves of a beverage are given by:
qD = 1,500 + p
qS = 500 + 2p
Calculate equilibrium price.
Answer & explanation
Correct answer: option 4
The correct answer is option 4: 1000
At equilibrium, market supply = market demand.
Equating them, we get 1500+p = 500+ 2p
1500-500 = 2p - p
1000 = p
Thus, the equilibrium price is 1000.