If market demand function is given as: `Q_(“MD”)=25-2P` and market supply as: `Q_(“MS”)=3P`, then what will be the equilibrium price and equilibrium quantity?
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At equilibrium,`Q_(MD)=Q_(MS)`
It means, 25 – 2P = 3P
Or, 5P=25
P or Equilibrium Price = rupee 5.
Putting the value of equilibrium price in the equation of market demand function: Equilibrium Quantity= 25 – 2 x 5=15 units.