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CA Foundation · Business Economics · Theory of Demand and Supply

The demand function for a product is Qd = 300 − 5P and the supply function is Qs = 60 + 7P, where P is in rupees. What are the equilibrium price and equilibrium quantity?

Equating demand and supply gives 300 − 5P = 60 + 7P, so 12P = 240 and the equilibrium price is ₹20. Substituting into either function gives a quantity of 200 units, since 300 − 100 and 60 + 140 both equal 200.

  1. AP = ₹20, Q = 200Correct
  2. BP = ₹25, Q = 175
  3. CP = ₹20, Q = 240
  4. DP = ₹30, Q = 150

Explanation

Set Qd = Qs: 300 − 5P = 60 + 7P, so 240 = 12P and P = 20. Quantity = 300 − 5(20) = 200. Check with supply: 60 + 7(20) = 200. Option P = 20 with Q = 240 wrongly uses a value that matches neither curve.

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