What is the equilibrium price?
At a price of $4.82 per pound, the supply for cherries is 16,366 pounds, and the demand is 10,294 pounds. When the price drops to $4.28 per pound, the supply decreases to 10,983 pounds and the demand increases to 12,887 pounds. Assume that the price-supply and price-demand equations are linear.
Understanding Equilibrium Price in Economics
In economics, the equilibrium price is the price at which quantity demanded equals quantity supplied. Equilibrium price can be determined by setting the demand equation equal to the supply equation and solving for the price. In this case, it involves calculating the slopes of the supply and demand equations and then solving for price.
Calculating the Equilibrium Price
The equilibrium price is the price at which the quantity demanded equals the quantity supplied. To find this, we first need to establish the supply and demand equations. We are given two points for each (Price $4.82, Supply 16,366), (Price $4.28, Supply 10,983) and for demand (Price $4.82, Demand 10,294), (Price $4.28, Demand 12,887). Using these points, we can establish the two equations.
For supply, the slope (m) will be (10,983 - 16,366) / (4.28 - 4.82) equals -10142.86. For demand, the slope (m) will be (12,887 - 10,294) / (4.28 - 4.82) equals 4642.86. The equilibrium is the price where supply equals demand, therefore we can set the two equations equal to each other and solve for P (price). The result is the equilibrium price.