The Algebraic Approach

The Algebraic Approach - The Algebraic Approach We have...

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The Algebraic Approach We have worked with supply and demand equations separately, but they can also be combined to find market equilibrium. We have already established that at equilibrium, there is one price, and one quantity, on which both the buyers and the sellers agree. Graphically, we see that as a single intersection of two curves. Mathematically, we will see it as the result of setting the two equations equal in order to find equilibrium price and quantity. If we are looking at the market for cans of paint, for instance, and we know that the supply equation is as follows: QS = -5 + 2P And the demand equation is: QD = 10 - P Then to find the equilibrium point, we set the two equations equal. Notice that quantity is on the left-hand side of both equations. Because quantity supplied is equal to quantity demanded at equilibrium, we can set the right-hand sides of the two equations equal. QS = QD

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This note was uploaded on 02/09/2012 for the course ECO ECO2013 taught by Professor Jominy during the Fall '08 term at Broward College.

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The Algebraic Approach - The Algebraic Approach We have...

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