What is the equilibrium price of down pillows based on the given demand and supply equations?
The equilibrium price of down pillows can be found by setting the demand and supply equations equal to each other. We have Qd (quantity demanded) = 100 - P and Qs (quantity supplied) = -20 + 2P. By solving these equations, we find that the equilibrium price of down pillows is $40 per pillow.
Understanding Equilibrium Price Calculation:
Demand Equation: Qd = 100 - P
Supply Equation: Qs = -20 + 2P
To find the equilibrium price, we need to set the quantity demanded equal to the quantity supplied:
100 - P = -20 + 2P
100 + 20 = 2P + P
120 = 3P
P = 120 / 3
P = 40
Therefore, the equilibrium price of down pillows is $40 per pillow. At this price, the quantity demanded by consumers will equal the quantity supplied by producers, leading to a market equilibrium.
In the given scenario, the equilibrium price is determined by balancing the demand and supply factors in the market for down pillows. When the price is set at $40 per pillow, the market reaches a state of equilibrium where neither excess supply nor excess demand exists.
This equilibrium price point plays a crucial role in market dynamics, as it influences consumer behavior, producer decisions, and overall market stability. Understanding how equilibrium price is calculated helps in analyzing market trends, pricing strategies, and the allocation of resources.