Find equilibrium price and equilibrium quantity

Reference no: EM131047980

The Automobile industry has been an active and growing field in Pakistan.There are many reasons which affect demand and supply of cars inPakistan. A few reasons are car financing facility, CNG, petrol prices andlaw and order situation of the country. The decrease in the price ofpetroleum products is current and acute reason to affect this industry. Thissituation is creating problems for petroleum products producing countrieson one side and at the same time, providing relief and advantage to theconsumers. Suppose, quantity demanded and quantity supplied equationsfor automobile industry is given below:Qd = 97650 - 5PQs = 650 + 3PRequirements:Keeping in mind the above scenario, solve the following questions.

a. Find equilibrium price and equilibrium quantity for automobileindustry. Also show equilibrium condition graphically.

b. Find out the price elasticity of demand and price elasticity of supplyof automobile industry when it is in equilibrium and interpret theresults.

c. How would the decrease in petrol prices have affected the marketequilibrium of automobile industry? Illustrate graphically.

Reference no: EM131047980

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