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CMA Foundation · Fundamentals of Business Economics and Management · Theory of Demand and Supply

The demand function for a product is Qd = 500 - 10P and the supply function is Qs = 20P - 100, where P is in rupees. What are the equilibrium price and quantity?

Equating demand and supply gives 500 - 10P = 20P - 100, so 30P = 600 and the equilibrium price is ₹20. Substituting back, quantity is 300 units on both the demand and supply sides, confirming equilibrium.

  1. AP = ₹20, Q = 300Correct
  2. BP = ₹15, Q = 350
  3. CP = ₹25, Q = 250
  4. DP = ₹20, Q = 200

Explanation

Set Qd = Qs: 500 - 10P = 20P - 100, so 600 = 30P and P = 20. Quantity = 500 - 10(20) = 300. Check with supply: 20(20) - 100 = 300. Option with Q = 200 wrongly uses a price of 20 in 10P only partly, and does not satisfy either function.

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