How do I solve for equilibrium price and quantity?
Sarah devotes £1000 of her yearly salary to leisure activities. She divides her budget on leisure activities between films & video games. The price of a video game is £30 and the market supply curve for movies is:
Pm = 4 +(1/3)Qm
and the market demand curve is: Pm= 60-2Qm
where pm is the market price of movies and qm is the quantity in thousands of movies.
What is the equilibrium price and quantity for movies and the producer and consumer surplus?
- OiyLv 61 year agoFavourite answer
Dm=DS, or 4+1/3Qm=60-2Qm, solve for Qm* and then Pm*. A consumer surplus = (60-Pm*)Qm*/2