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JAMB Economics 1988 Question 14

Question 14

Price Determination

The demand and supply equations for a commodity are given respectively as
D = 20 − ½P
S = 8 + ¼P
Recalling that at equilibrium, D = S, the equilibrium price (P) and quantity (Q) can be obtained as

  1. A.P = 12, Q = 16
  2. B.P = 14, Q = 10
  3. C.P = 12, Q = 14
  4. D.P = 16, Q = 12
Show the answer and explanation

Answer: D (P = 16, Q = 12)

Explanation

20 − ½P = 8 + ¼P gives 12 = ¾P, so P = 16. Then Q = 20 − 8 = 12.