Q. 12

Suppose the

Answer :


The market is in equilibrium when quantity demanded equals quantity supplied.

200-10p = 50+15p

25p = 150

P = 6

Qd = 200 – (10*6)

= 200 – 60

= 40 = Qs


ii) The market is in equilibrium when quantity demanded equals quantity supplied.

200-10p = 100+15p

25p = 100

P = 4

Qd = 200 – (10*4)

= 200 – 40

= 60 = Qs


When the price of the factor input changes, the equilibrium quantity has increased from 40 to 60 and the equilibrium price has reduced from 6 to 4. Thus there has been a reduction in the price of the factor input resulting in the changes in the quantity demanded and supplied.

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