Question

Calculate the equilibrium price, if the aggregate demand function is D = 250 -15P and aggregate supply function is S = 50 + 10P :

• A. 8
• B. 10
• C. 15
• D. 12

Hint:

You can easily check your answer by substituting the calculated price back into both equations:
$D = 250 - 15(8) = 130$
$S = 50 + 10(8) = 130$
Since the quantities match, the price is correct.

Answer 1

The Correct Option is A

Step 1: Understanding the Concept:
Market equilibrium is achieved at the price where the quantity demanded equals the quantity supplied.
Mathematically, we set the demand function equal to the supply function to find the equilibrium price.
Key Formula or Approach:
Set:
\[ D = S \] And solve for the price ($P$).

Step 2: Detailed Explanation:
The given equations are:
\[ D = 250 - 15P \] \[ S = 50 + 10P \] Equating the two:
\[ 250 - 15P = 50 + 10P \] Collect all variable terms on one side and constant terms on the other:
\[ 250 - 50 = 10P + 15P \] \[ 200 = 25P \] Solve for $P$:
\[ P = \frac{200}{25} = 8 \] Thus, the equilibrium price is 8.

Step 3: Final Answer:
The equilibrium price is 8, which matches Option (A).