Syracuse University

Solving for the quantity demanded as a function of price:

W2P = 400 - 2*Qd

W2P = P (for the last unit purchased)

P = 400 - 2*Qd

2*Qd = 400 - P

Qd = 200 - 0.5*P

Solving for the quantity supplied as a function of price:

W2A = 100 + Qs

W2A = P (for the last unit sold)

P = 100 + Qs

Qs = P - 100

At equilibrium, Qd will be equal to Qs. Using that to solve for the equilibrium P:

Qd = Qs

200 - 0.5*P = P - 100

300 = 1.5*P

P = 200

Solving for the quantity:

Qd = 200 -0.5*(200) = 100

Checking:

Qs = P - 100 = 200 - 100 = 100

Qs = Qd (passes check)

Since there are no taxes, subsidies or other interventions in the market, W2P should equal W2A on the last unit traded. Checking:

W2P = 400 - 2*Qd = 400 - 2*100 = 200

W2A = 100 + Qs = 100 + 100 = 200

W2P = P = W2A (passes check)

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URL: https://wilcoxen.maxwell.insightworks.com/pages/2298.html

Peter J Wilcoxen, The Maxwell School, Syracuse University

Revised 09/13/2006

URL: https://wilcoxen.maxwell.insightworks.com/pages/2298.html

Peter J Wilcoxen, The Maxwell School, Syracuse University

Revised 09/13/2006