Answered: supply equations

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Suppose the demand equation for shale gas is Qd=10P^-1.8 and the supply equations Qs=2P^0.2

What is the equilibrium price and equilibrium quantity?

Definition Video Definition Point where the demand and supply curves intersect. At the equilibrium price the quantity supplied of a good is equal to the quantity demanded. When the market is not in equilibrium, market surplus or market shortage occurs. The region that is above the price equilibrium indicates market surplus and the region below the price equilibrium indicates market shortage. Video

Expert Solution

Step 1

Given the equations

Demand (Qd)=10P^-1.8

Supply (Qs)=2P^0.2

Equate Demand and supply to obtain equilibrium quantity and supply.

Step 2

Demand (Qd)= Supply (Qs)

=10P^-1.8 = 2P^0.2

=(10P^-1.8) - (2P^0.2)

P= 6.3095 - 1.1486 = 5.16

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