Example, equilibrium in the wheat market

A numerical example shows how to find the equilibrium price and how to represent it graphically as the intersection of the two lines.

Example — Equilibrium in the wheat market

In a small region the wheat market is described (in thousands of tonnes, price in EUR/q): $Q_d(p) = 200 - 5\,p, \qquad Q_s(p) = -40 + 3\,p.$ Equilibrium: $200-5p=-40+3p \implies 240=8p \implies p^\ast=\boxed{30}\text{ EUR/q}, \quad Q^\ast=200-150=\boxed{50}\text{ kt}.$

The demand ($Q_d$, in blue) and supply ($Q_s$, in green) lines meet at the equilibrium point $E$: price $30$ EUR/q, quantity $50$ kt.

Links

Topics: Linear systems
Concepts: Supply and demand · Equilibrium price
Skills: Interpret graph · Model · Solve systems