There is a relationship between the price p of a manufactured item and the quantity q that can be sold at price p. An equation relating these two is called a demand equation, and its graph is called a demand curve. As the price p increases, the demand q decreases. Similarly, there is a relationship between p and q from the point of view of the manufacturer. In this case, q is the quantity that the manufacturer is willing to produce when the selling price is p. An equation relating the selling price and the amount produced is called the supply equation. In this case, q increases with the price. When the demand exceeds the supply, there is a tendency for the price to increase; when the supply exceeds the demand, there is a tendency for the price to decrease. The point at which the supply equals the demand is called market equilibrium. Suppose that, for a given item, the supply equation is q = 194p − 284 and the demand equation is q = 538 − 106p, where p is the price in dollars and q is the quantity in thousands. Graph these two equations on the same set of axes and find the market equilibrium.
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