Consider the market for gasoline. Suppose the market demand and supply curves ar

Question

Consider the market for gasoline. Suppose the market demand and supply curves are as given below. In each? case, quantity refers to millions of litres of gasoline per? month; price is the price per litre? (in cents). ?Demand: Pequals300minus24QD ?Supply: Pequals120plus8QS Compute the equilibrium price and quantity. The equilibrium quantity is nothing million litres. ?(Enter your response rounded to one decimal? place.) The equilibrium price is nothing cents per litre. ?(Enter your response rounded to the nearest? cent.)

Explanation / Answer

Demand equation is

P = 300 - 24Qd  

24Qd = 300 - P

Qd = 12.5 - 0.0417P

Supply equation is

P = 120 + 8Qs

8Qs = P - 120

Qs = 0.125P - 15

The equilibrium quantity is found by equating quantity demanded and quantity supplied

Qd = Qs

12.5 - 0.0417P = 0.125P - 15

Price = 164.97

Equilibrium quantity = 0.125P - 15

Equilibrium quantity = 0.125 * 164.97 - 15

Equilibrium quantity = 5.6 units

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