Economics Management: Equilibrium Price and Quantity of Apple Industry

Running head: ECONOMICS MANAGEMENT
Economics management
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1ECONOMICS MANAGEMENT
Apple industry:
1.1 Given form of the demand curve is QD = a –bP
Hence, let the demand curve is: QD = 120 – 20 P
1.2 Given form of the supply curve is QS = c + dP
Hence, let the supply curve is: QS = -40 + 20 P
1.3 Equilibrium values: QD = QS
120 – 20 P = -40 + 20 P
 20 P + 20 P = 120 + 40
 40 P = 160
 P = 160/ 40
 P = 4
Hence, equilibrium price is $ 4
Substituting this value in demand function, equilibrium quantity of apple can be obtained:
Q= 120 – 20 * 4
 Q= 120 – 80
 Q= 40
Hence, the equilibrium quantity of apple in industry is 40.

2ECONOMICS MANAGEMENT
Price
Quantity
QS = -40 + 20
P
QD = 120 – 20
P
40O
4
1.3
Figure 1: Equilibrium price and quantity of apple industry
1.4: According to law of demand, price for a particular quantity has a negative relationship
with its quantity demanded (Zoutman, Gavrilova and Hopland 2018). This situation has
occurred within this apple industry as well. The demand function is QD = 120 – 20 P, which
represents a straight-line demand equation. Hence, the slope of this curve is – 20, which
means, the curve has possessed a negative slope of 20 indicating a downward slopping
demand curve and this is called marginal price. On the other side, 120 is the intercept of this
demand equation. This represents that when price is zero, people can demand 120 unit of
apple and as price goes up, the demand for apple decreased and vice versa. Hence, factors
that influence shape of the demand curve are slope and intercept of the demand equation.
1.5: The initial equilibrium price of apple is $ 4 and equilibrium quantity is 40. Suppose the
demand for this specified product changes for one price interval above the equilibrium