The demand for capital is Q^D = 46 - 10r and the supply of capital is Q^S = 2r - 2, where r is the interest rate (measured as a percentage) and Q measures the quantity of capital in millions of dollars. The equilibrium quantity of capital is ____.

Question

Quizplus · Accepted Answer

To find the equilibrium quantity, set Q^D equal to Q^S: 46 - 10r = 2r - 2. Solving for r gives r = 4.8. Substitute r = 4.8 back into either the demand or supply equation to find the equilibrium quantity: Q = 46 - 10(4.8) = 6.

The Demand for Capital Is QD = 46 - 10r

The Demand for Capital Is Q^D = 46 - 10r