Market Equilibrium for Portable Radios
Market Equilibrium Calculation
Suppose the domestic demand for portable radios is represented by the equation Q = 5,000 â 100P, where Q is the quantity demanded and P is the price. The domestic supply is represented by the equation Q = 150P, where Q is the quantity supplied. At equilibrium, demand equals supply.
Setting the demand and supply equations equal to each other:
5,000 â 100P = 150P
250P = 5,000
P = 5,000/250
Equilibrium price (P) = $20
Substituting the equilibrium price back into the demand equation:
Q = 5,000 â (100*20)
Equilibrium quantity (Q) = 3,000 portable radios
Therefore, 3,000 portable radios would be produced domestically and no portable radios would be imported at the equilibrium price of $20.