The demand and supply of capital are given by Q^D = 50 - 8r and Q^S = 4r - 10, where Q is the quantity of capital in millions of dollars and r is the interest rate measured as a percentage. What is the equilibrium quantity of capital?

Question

Quizplus · Accepted Answer

To find the equilibrium quantity of capital, set the demand and supply equations equal to each other and solve for r: 50 - 8r = 4r - 10. Solving for r gives r = 7.5%. Substituting r back into either the demand or supply equation gives Q = 10 million.

The Demand and Supply of Capital Are Given by QD

The Demand and Supply of Capital Are Given by Q^D