CA Foundation · Business Economics · Theory of Demand and Supply
The demand function for a product is Qd = 240 − 6P and the supply function is Qs = 20 + 5P, where P is in rupees. What is the equilibrium quantity?
Equating demand and supply gives 240 − 6P = 20 + 5P, so P is ₹20. Substituting into either function gives quantity of 120 units on both sides, so the equilibrium quantity is 120 units.
- A20 units
- B100 unitsCorrect
- C120 units
- D80 units
Explanation
Set Qd = Qs: 240 − 6P = 20 + 5P, so 220 = 11P and P = ₹20. Then Q = 240 − 120 = 120? Check: 240 − 6×20 = 120, and supply 20 + 100 = 120. So the equilibrium quantity is 120 units; the option giving 100 units is wrong.
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