Suppose the functions of demand and supply curves of a commodity are given by : `q^(D)=100-p`
`q^(S)=60+p" for "pge15`
`=0" for "0leplt15`
(i) What does p=15 indicate ?
(ii) Find the equilibrium price and equilibrium quantity.
(iii) Whether the given commodity comes under the category of viable industry.
(iv) Calculate market demand and at price of rupee 16, there is excess demand.

Explanation

(i) p = 15 indicates that the minimum average cost of the firm is rupee 15 and firm will not supply the commodity for any price less than rupee 15.
(ii) Calculation of Equilibrium Price and Equilibrium Quantity At equilibrium, `q^(D)=q^(S)`
It means, 100 - p = 60 + p
2p = 40 or p or Equilibrium Price = rupee 20. Putting the value of equilibrium price in the equation of demand curve:
`q^(D)` or Equilibrium Quantity= 100 - 20 = 80 units.
(iii) Yes, the given commodity comes under the category of viable industry as there is some price, at which supply and demand happen to coincide.
(iv) At price of rupee 25: Market Demand = 100 - 25=75 units, Market Supply = 60 + 25 = 85 units. There will be excess supply at price of 25. At price of rupee 16: Market Demand= 100 - 16=84 units, . Market Supply = 60 + 16 = 76 units. There will be excess demand at price of rupee 16.