In a market, demand is q = 300 - 2p and supply is q = 3p - 100. Both demand and supply rise by 50 units at every price. What are the new equilibrium price and quantity?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Rs 80; 190 units
Given:
Demand: q = 300 − 2p
Supply: q = 3p − 100
Both rise by 50 units at every price
Set the new demand equal to the new supply. Both curves move right by the same 50 units.
Old equilibrium:
\( 300 - 2p = 3p - 100 \)
\( 5p = 400 \)
\( p = 80 \)
\( q = 300 - 2 \times 80 = 140 \)
New equilibrium, with demand q = 350 − 2p and supply q = 3p − 50:
\( 350 - 2p = 3p - 50 \)
\( 5p = 400 \)
\( p = 80 \)
\( q = 350 - 2 \times 80 = 190 \)
The price stays at Rs 80 and the quantity rises to 190 units. When both curves shift right, quantity surely rises; the price depends on the sizes of the shifts, and here the two shifts cancel out at the old price.
NCERT (2026-27): “Simultaneous Shifts of Demand and Supply … For instance, from the second row of the table, we see that due to a rightward shift in both demand and supply curves, the equilibrium quantity increases invariably but the equilibrium price may either increase, decrease or remain unchanged. The actual direction in which the price will change will depend on the magnitude of the shifts. …” “In the Figure 5.4(a), it can be seen that due to rightward shifts in both demand and supply curves, the equilibrium quantity increases whereas the equilibrium price remains unchanged, …” |