Suppose there are 11 buyers and 11 sellers,each willing to buy or sell one unit of a good,with values {$14,$13,$12,$11,$10,$9,$8,$7,$6,$5,$4,}.Assume no transaction costs and a competitive market,what is the equilibrium price in this market?

Question

Suppose there are 11 buyers and 11 sellers,each willing to buy or sell one unit of a good,with values {$14,$13,$12,$11,$10,$9,$8,$7,$6,$5,$4,}.Assume no transaction costs and a competitive market,what is the equilibrium price in this market?​

Quizplus · Accepted Answer

In a competitive market, the equilibrium price is determined by the intersection of the supply and demand curves. In this case, with 11 buyers and 11 sellers, the supply and demand curves will intersect at the price where the 11th buyer is just willing to buy and the 11th seller is just willing to sell. Since the buyers and sellers have values ranging from $4 to $14, the equilibrium price will be somewhere in this range. However, we know that the 11th buyer and 11th seller will have values of $5 and $10 respectively (since they are the lowest and highest values in the group), so the intersection of their values would be the equilibrium price. Thus, the equilibrium price is $10.

Suppose There Are 11 Buyers and 11 Sellers,each Willing to Buy