The demand for capital is Q^D = 100 - 20r and the supply of capital is Q^S = 12r - 28, where r is the interest rate and Q is the quantity of capital in millions of dollars. The equilibrium quantity of capital is ____.

Question

Quizplus · Accepted Answer

To find the equilibrium quantity of capital, set the demand equal to the supply and solve for r: 100 - 20r = 12r - 28. Solving this equation gives r = 4. Substitute r = 4 into either the demand or supply equation to find Q: Q = 100 - 20(4) = 100 - 80 = 20 million dollars.

The Demand for Capital Is QD = 100 - 20r

The Demand for Capital Is Q^D = 100 - 20r