The demand function for oil has the form QD = 40 – 7Р, where QD is the demand for oil, and Р is the price in rubles

The demand function for oil has the form QD = 40 – 7Р, where QD is the demand for oil, and Р is the price in rubles per 1 kg. The supply function is described by the following equation: QS = -6 + 16P, where QS is the oil supply per day (kg). Determine: a) the equilibrium price and the volume of sales; show it graphically; b) how demand and supply change if the price is set equal to 4 units; c) what happens to the volume of sales if the price settles at the level of 1 unit.

A) Condition of market equilibrium: QD = QS.
40 – 7P = -6 + 16P; 23Р = 46 Р = 2 – equilibrium price
Determine the equilibrium sales volume by substituting the value of P:

QD = QS 40 – 7 * 2 = -6 + 16 * 2;
26 = 26
Q = 26 – equilibrium sales volume
The P * and Q * values ​​can also be obtained graphically.

B) If the equilibrium price becomes 4 units, then: The volume of demand will be:
QD = 40 – 7 * 4 = 12 pcs.
Supply volume:
QS = -6 + 16 * 4 = 58 pcs.
The volume of supply will be higher than the volume of demand. We get a surplus in size:
QS – QD = 58 – 12 = 46 pcs.;

C) If the equilibrium price drops to 1 unit. then: The volume of demand will be:
QD = 40 – 7 * 1 = 33 pcs.
Supply volume:
QS = -6 + 16 * 1 = 10 pcs.
So, the volume of supply will be lower than the volume of demand. A lack of size is formed:
QD – QS = 33 – 10 = 23 pcs.

ANSWER: A) 2; 26 B) EXCESS C) EXCESS