Suppose the demand and supply curve of commodity X in a perfectly competitive market are given by:
qD = 700 − p
qS = 500 + 3p for p ≥ 15
= 0 for 0 ≤ p <15
Assume that the market consists of identical firms. Identify the reason behind the market supply of commodity X being zero at any price less than Rs 15. What will be the equilibrium price for this commodity? At equilibrium, what quantity of X will be produced?
How does a favourable change in taste for a commodity affect the market price and quantity exchanged for the commodity?