Market demand is given as Qd = 40 - 2P.Market supply is given as Qs = 2P.In a perfectly competitive equilibrium, what will be price and quantity traded in the market?
A) Price will be $20, and quantity will be 10.
B) Price will be $20, and quantity will be 40.
C) Price will be $10, and quantity will be 20.
D) Price will be $40, and quantity will be 20.

Question

Market demand is given as Qd = 40 - 2P.Market supply is given as Qs = 2P.In a perfectly competitive equilibrium, what will be price and quantity traded in the market?  
A) Price will be $20, and quantity will be 10. 
B) Price will be $20, and quantity will be 40. 
C) Price will be $10, and quantity will be 20. 
D) Price will be $40, and quantity will be 20.

Quizplus · Accepted Answer

In a perfectly competitive equilibrium, market demand equals market supply. Therefore, we can equate Qd and Qs and solve for P and Q.
Qd = Qs
40 - 2P = 2P
40 = 4P
P = 10 
Substitute P=10 back into either Qd or Qs to solve for Q.
Qd = 40 - 2P = 40 - 2(10) = 20 
Therefore, the equilibrium price is $10, and the equilibrium quantity is 20.

Market Demand Is Given as Qd = 40 - 2P