Question

The market for iced tea is characterized by the following supply and demand functions:

Supply: Q_s=50+8p

Demand: QD=120−6p ,

where Q_s stands for quantity supplied (number of bottles), Q_D stands for quantity demanded (number of bottles), and p stands for price (per bottle). Suppose that the current price per bottle in the market for iced tea is $6.

A) At the price of $6 per bottle in the market for iced tea, sellers would want to sell     bottles.

B) At the price of $6 per bottle in the market for iced tea, buyers would want to buy     bottles.

C) Once the market reaches an equilibrium, the price will  decrease to $    per bottle, and the quantity will  increase to     bottles.

Answer 1

At price=$6

A) Sellers would want to sell=50+8(6)=98 bottles

b) Buyers would want to buy 120-6(6)=120-36=84 bottles

C) equilibrium will be achieved when Qd=Qs

50+8P=120-6P

14P=70

Price will be reduced to $5 and quantity will be increased to 90 bottles