- 25 Marks
QMDM – JULY 2020 – L2 – Q4 – Demand and Supply Equilibrium
Calculate equilibrium from functions, graphically determine from table data, explain excess demand/supply conditions.
Question
The demand and supply functions are given below:
a) P = 900 – 0.5Q and P = 300 + 0.25Q. What is the equilibrium price and quantity? (10 marks)
The table below shows the quantity of products supplied and demanded per week in Kaneshie market.
| Quantity Demanded | Quantity Supplied | Price |
|---|---|---|
| 8 | 57 | 10 |
| 10 | 35 | 8 |
| 15 | 30 | 6 |
| 18 | 28 | 5 |
| 25 | 25 | 4 |
| 26 | 22 | 3 |
| 30 | 18 | 3 |
| 32 | 15 | 2 |
| 35 | 10 | 1 |
b) Graphically determine the equilibrium point, explaining the circumstances under which there will be excess demand and supply. (15 marks)
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