Qp = 85 -0.4P, where Qp is the quantity in millions of barrels per day and P is price per barrel in dollars. Suppose also that the supple for crude oil is given by: Qs = 55 +0.6P a) Calculate equilibrium price and quantity in this market. b) Calculate the "excess demand" for crude oil if the market price is $15.00 per barrel. c) Calculate the "excess supply" of crude oil if the market price is $50.00 per barrel.
Qp = 85 -0.4P, where Qp is the quantity in millions of barrels per day and P is price per barrel in dollars. Suppose also that the supple for crude oil is given by: Qs = 55 +0.6P a) Calculate equilibrium price and quantity in this market. b) Calculate the "excess demand" for crude oil if the market price is $15.00 per barrel. c) Calculate the "excess supply" of crude oil if the market price is $50.00 per barrel.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:10. Suppose that the demand for crude oil is given by:
QD = 85 -0.4P, where Qp is the quantity in millions of barrels per day and P is
price per barrel in dollars.
Suppose also that the supple for crude oil is given by:
Qs = 55 +0.6P
a) Calculate equilibrium price and quantity in this market.
b) Calculate the "excess demand" for crude oil if the market price is $15.00
per barrel.
c) Calculate the "excess supply" of crude oil if the market price is $50.00
per barrel.
Expert Solution
Step 1: Define equilibrium
Equilibrium refers to the market situation when quantity demanded by consumer equals the quantity supplied by producer.
Price at which equilibrium occurs known as equilibrium price and quantity known as equilibrium quantity..
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