Need some quick help with calculating equilibrium price and quantity algebraically? In a microeconomics class, calculating equilibrium price and quantity in a Demand and Supply model is one of those constants - kind of like death and taxes - you know you'll end up doing it. How is it done? Using the numerical values from section A of the handout "Who Pays the Tax", let's take a closer look.
Step 1: What are the Demand and Supply equations?
Step 2: At equilibrium, Qd = Qs, and so let's substitute Q into the Demand and Supply equations (since Qd and Qs will be the same anyway).
Step 3: Equilibrium occurs where Demand crosses Supply. Therefore, let's set the Demand and Supply equations equal to one another and solve for equilibrium Q.
Step 4: Find the equilibrium price P* by plugging the equilibrium quantity Q* into either the Demand or Supply equation (it doesn't matter which one if we're calculating equilibrium). Let's do both anyway, just to double check ourselves.
The equilibrium price and quantity?