Posted: February 10th, 2016

The producer of a cosmetic product needs to decide the optimal price to charge and the optimal quantity to supply in the market. The demand function of the cosmetic product is

The producer of a cosmetic product needs to decide the optimal price to charge and the optimal quantity to supply in the market. The demand function of the cosmetic product is given as QD = 40 – 2P, while the supply function of the cosmetic product is given as QS = 2P where P is price, QD is quantity demanded, and QS is quantity supplied.

Task: Solve the following:

The demand function is given as QD = 40 – 2P.
The supply function is given as QS = 2P.

Calculate the equilibrium price and quantity. Please provide a step-by-step calculation to show how you arrived at the answer.