Homework Answers
Use D = 200 and E = 200 in demand functions
Pd = 450 - 200 + 0.5Pe or Pd - 0.5Pe = 250
Pe = 300 - 200 + Pd or Pe - Pd = 100
Now we have Pd - 0.5Pe = 250 and Pe - Pd = 100
This becomes
Pe - (250 + 0.5Pe) = 100
0.5Pe = 350
Pe = 700 and so Pd = 600
Hence equilibrium prices are Pe = 700 and Pd = 600
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