CMA Foundation · Fundamentals of Business Economics and Management · The Fundamentals of Economics
The demand function for a product is Qd = 120 − 4P and the supply function is Qs = 20 + 6P, where P is in rupees. What are the equilibrium price and quantity?
Equilibrium price is ₹10 and quantity is 80 units. Equating demand 120 − 4P with supply 20 + 6P gives 10P = 100, so P = 10. Substituting back gives 120 − 40 = 80 on demand and 20 + 60 = 80 on supply, confirming the result.
- AP = ₹8, Q = 88
- BP = ₹10, Q = 80Correct
- CP = ₹12, Q = 72
- DP = ₹10, Q = 100
Explanation
Set Qd = Qs: 120 − 4P = 20 + 6P, so 100 = 10P and P = ₹10. Then Q = 120 − 40 = 80, and check supply: 20 + 60 = 80. The option with Q = 100 wrongly uses the intercept sum instead of substituting P.
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