Suppose the demand and supply curves of coffee are given by:
qD = 1,000 - p,
qS = 700 + 2p
Calculate equilibrium quantity.
Answer & explanation
Correct answer: option 3
The correct answer is option 3: 900
At equilibrium, market supply = market demand.
Equating them,
we get 1000-p = 700+ 2p
or 1000-700 = 2p + p
or 300 = 3p
or 100 = p
Putting p = 100 in any equation, we get
q = 1000-p = 1000-100 = 900.
So equilibrium quantity is 900.