Teh demand and supply curves for a product are Qd = 40 - P and Qs =
0.5P -5, respectively.

a) calculate the equilibrium price and quantity
b) Draw a graph showing the demand and supply curves(with vertical and
horizontal intercepts) and the equiibrium price and quantity.
c) calculate the buyers's total surplus, the sellers's total surplus
and combined buyer's and seller's surplus.


Okay I need help in the area of finding the equilibrium price. What I
did was

40 -p = .5P -5

45   =   1.5P

30 = P  

then I plugged 30 into QS and then QP and ended up with Qs = 10 and Qp
= 10. So is this the equilibruim price?  because I was given this
formula for the equillibruim price

Ep = 1/slope * p/q and Es = 1/slope * p/q ..if the slope is 1/p/q
which i got for Qp 40/40 =1 ..what is the p/q values? clarity..what do
I use for 1/slope * p/q for each?

Hi derekwtp!!

The equilibrium price is the point in which both Demand and Supply
curves intersect, so to find the equilibrium price in this kind of
problems you must first equal both curves' equations:  Qd = Qs .
From this equality you must find P, which will be the equilibrium
price (in this case equilibrium price is P = $30).

When you plug the equilibrium price found above into Qs OR Qd you will
have the market equilibrium quantity that corresponds to the
equilibrium price, the result is the same because this is the quantity
amount in which both curves intersect.

For more reference on this point:
"Equilibrium Price and Quantity":
http://www.mhhe.com/economics/mcconnellmicro15e/graphics/mcconnell15eco/common/dothemath/equilibriumpriceandquantity.html

"Algebraic Solution of Linear Supply and Demand Models" by R. Wigle:
http://www.wlu.ca/~wwwsbe/faculty/rwigle/ec238/ref/pe-algebra.pdf

"Supply & Demand, Part 2" by Prof. John M. Abowd and Jennifer P.
Wissink, Cornell University (this is a ppt file, you can see it with
MS Powerpoint):
http://instruct1.cit.cornell.edu/courses/econ101wissinkfall99/ppp/lecture-supply&demand-2.ppt


In regards to the calculations of the buyers's total surplus, the
sellers's total surplus and combined buyer's and seller's surplus you
can see useful info in the following pages:
"Consumer and producer surplus" from Wikipedia:
http://www.wikipedia.org/wiki/Consumer_and_producer_surplus

"Consumer and Producer Surplus" from Virginia Tech Mathematics
Department:
http://www.math.vt.edu/people/hoggard/class_home/fa00/1526/1526surplus.PDF

From the "Department of Agricultural, Environmental, and Development
Economics" of the Ohio State University, the following solved
problemas may halps you to undestand these topics (Ms Word document):
http://www-agecon.ag.ohio-state.edu/class/aede531/haab/suggested%20answer%20for%20exercise%201.doc

-----------------------------------------------------------

Regarding to the formula:  E = 1/(slope of curve) * p/q ;
it is used to calculate the point-elasticity (that is the elasticity
at a given point (quantity or price)).
You will find more on this here:
"The Concept of Elasticity" by Prof. John M. Abowd from the Cornell
University Instructional:
http://instruct1.cit.cornell.edu/courses/econ101-dl/lecture-elasticity.html

--------------------------------------------------------------

I hope this helps you. If you still feel that this answer is not
giving you enough help, please remember to ask me for all the
clarifications needed before rate this answer, using the request for
an answer clarification feature.


Best regards.
livioflores-ga

---

Clarification of Answer by livioflores-ga on 28 Sep 2003 02:44 PDT

Ouch!!

There are some typos, it must be:
In regard to the calculations of the buyers's total surplus, the
sellers's total surplus and combined buyer's and seller's surplus you
can see useful info in the following pages:
"Consumer and producer surplus" from Wikipedia: 
http://www.wikipedia.org/wiki/Consumer_and_producer_surplus 
 
"Consumer and Producer Surplus" from Virginia Tech Mathematics
Department:
http://www.math.vt.edu/people/hoggard/class_home/fa00/1526/1526surplus.PDF
 
From the "Department of Agricultural, Environmental, and Development
Economics" of the Ohio State University, the following solved PROBLEMS
MAY HELPS YOU TO UNDERSTAND these topics (Ms Word document):
http://www-agecon.ag.ohio-state.edu/class/aede531/haab/suggested%20answer%20for%20exercise%201.doc


Regards.
livioflores-ga