Equilibrium Calculation Review
An economic analyst is tasked with finding the equilibrium point for the local wheat market. The market's demand is described by the function , and the supply is described by , where P is the price per bushel and Q is the quantity in thousands of bushels.
The analyst submits the following calculation: Step 1: Set functions equal: $500 - 20P = 50 + 30P Step 2: Solve for Q: $450 = 50Q, so . Step 3: Substitute Q back into the demand function: $9 = 500 - 20P, so $20P = 491, and P = \24.55. Conclusion: The equilibrium quantity is 9,000 bushels and the equilibrium price is \24.55.
Identify the fundamental error in the analyst's methodology. Then, perform the correct calculation to find the actual equilibrium price (P*) and quantity (Q*).
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Sociology
Social Science
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Economics
Economy
Introduction to Microeconomics Course
CORE Econ
Ch.8 Supply and demand: Markets with many buyers and sellers - The Economy 2.0 Microeconomics @ CORE Econ
Analysis in Bloom's Taxonomy
The Economy 2.0 Microeconomics @ CORE Econ
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