QUESTION 3

Suppose demand curve equation for three firms are given as below.
Firm A : P = 500 2Q
Firm B : Q = 40 0.5P
Firm C : P = 100 0.25Q

a) Determine market demand curve equation.

Market demand is equal to QA + QB + QC
(Make Q the subject)

i. PA = 500 2Q
QA =

500 P
2

QA = 250 0.5P

ii. QB = 40 0.5P

iii. PC = 100 0.25Q

QC =

100 P
0.25

QC = 400 4P

iv. QM = QA + QB + QC
QM = (250 0.5P) + (40-0.5P) + (400-4P)
QM = 690 5P
PM =

690 QM
5

PM = 138 0.2QM

b) Given price is RM30, find the quantity for each firms and for the market.

When P = RM30,
Market will purchase,
i. QM = 690 5P
= 690 5(30)
= 690 150
QM = 540

Each firm will purhase,

ii. QA = 250 0.5P
= 250 - 0.5(30)
= 250 15
QA = 235

iii. QB = 40 0.5P
= 40 0.5(30)
= 40 - 15
QB = 25

iv. QC = 400 4P
= 400 4(30)
= 400 -120
QC = 280