The demand for cars in a certain country is given by: D = 20,000 - P, where P is the price of a car. Supply by domestic car producers is: S = 5,000 + 0.5P. Suppose the economy is closed. The equilibrium price of a car is ________ and equilibrium quantity is ________.

Question

Quizplus · Accepted Answer

In a closed economy, the equilibrium price equates the quantity supplied and the quantity demanded. Solving 20,000 - P = 5,000 + 0.5P, we see that P* = $10,000. At that price, Q* = 10,000.

The Demand for Cars in a Certain Country Is Given