Suppose that the market for cigarettes is initially in equilibrium and is perfectly competitive. The demand curve can be expressed as $P = 60 - Q ^ { d }$ ; the supply curve can be expressed as $P = 0.5 Q ^ { s }$ . Quantity is expressed in millions of boxes per month. What are the amount traded and the price for this market?
A) Q = 40; P = 20
B) Q = 20; P = 40
C) Q = 30; P = 30
D) Q = 30; P = 15

Question

Quizplus · Accepted Answer

In a perfectly competitive market, the equilibrium price and quantity are determined by the intersection of the demand and supply curves. In this case, the demand curve is $P = 60 - Q ^ { d }$ and the supply curve is $P = 0.5 Q ^ { s }$. Setting these two equations equal to each other, we get:$$60 - Q ^ { d } = 0.5 Q ^ { s }$$$$60 - Q ^ { d } = 0.5 Q$$$$60 = 1.5 Q$$$$Q = 40$$Substituting this value of Q back into either the demand or supply equation, we get:$$P = 60 - Q ^ { d }$$$$P = 60 - 40$$$$P = 20$$Therefore, the equilibrium price is $20 and the equilibrium quantity is 40 million boxes per month.

Suppose That the Market for Cigarettes Is Initially in Equilibrium P=60−QdP = 60 - Q ^ { d }P=60−Qd

Suppose That the Market for Cigarettes Is Initially in Equilibrium $P = 60 - Q ^ { d }$