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The widget market is competitive and includes no transaction costs
The widget market is competitive and includes no transaction costs. Five suppliers are willing to sell one widget at the following prices: $30, $29, $20, $16, and $12. Five buyers are willing to buy one widget at the following prices: $10, $12, $20, $24, and $29. What is the equilibrium price and quantity in this market?
Expert Solution
Answer:
For supply curve, at a price of $12, one seller will be willing to sell; at a price of $16, two sellers will be willing to sell; and so on, until, at a price of $30, all five sellers would be willing to sell. The opposite will apply to the behavior of buye rs whereby at a price of $29; one buyer will be willing to buy and at a price of $10; all five buyers would buy. The market equilibrium is at a price of $3 because the quantity supplied equals the quantity demanded which is 20 widgets at this price.
|
Prices |
Supply |
Prices |
Demand |
Difference |
|
$12 |
1 |
$10 |
5 |
-$17 |
|
$16 |
2 |
$12 |
4 |
-$8 |
|
$20 |
3 |
$20 |
3 |
$0 |
|
$29 |
4 |
$24 |
2 |
$17 |
|
$30 |
5 |
$29 |
1 |
$20 |
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