which can be rewritten to get:
The equilibrium price for potatoes is therefore $16 per crate. To find the
equilibrium quantity, we substitute this price into either the demand or
supply equation. Using either equation, we get
So the equilibrium quantity of potatoes in Atlantic Canada in 2019 is 52
(thousand) crates. Readers are directed to the Study Exercises at the end
of this chapter to work through other algebraic and numerical examples
of market equilibrium.
Relative Prices
The theory we have developed explains how individual prices are
determined by the forces of demand and supply. To facilitate matters, we
have made ceteris paribus assumptions. Specifically, we have assumed the
constancy of all prices except the one we are studying. This assumption
forces us to make the distinction between absolute prices and relative
prices.
The price of a product is the amount of money that must be spent to
acquire one unit of that product. This is called the absolute price or
80 = 5 p
⇒p = 16QD= 100 − 3 ( 16 )= 52 or QS= 20 + 2 ( 16 )= 52