Chapter 4.1, Problem 71E

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7th Edition

Stefan Waner + 1 other

ISBN: 9781337274203

Textbook Problem

Both the supply and demand equations for a certain product have negative slope. Can there be an equilibrium price? Explain.

To determine

Whether there can be an equilibrium price if the supply and demand equations for a certain product have negative slope.

Explanation

An equilibrium occurs when supply equals demand.

Both the supply and demand equations for a certain product have negative slope.

Since, if the two lines corresponding to the two equations in a plane intersects at a point implies equilibrium exists at that point.

Also, two lines with negative slopes can also intersect.

For example, consider the demand and supply equation for a certain product as,

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