What is the equilibrium quantity (QE) and price (PE) in the U.S. bottled water market?
Suppose that the U.S. market for bottled water is modeled as follows:
S = MSC = 1 + 0.3Q D = MSB = 5 – 0.1Q,
whereQ is billions of gallons per year and MSC and MSB are in dollars per gallon.
To find the equilibrium price and quantity, set MSC equal to MSB, and solve for QE.
MSB = MSC
5 – 0.1Q = 1 + 0.3Q
4 = 0.4Q
QE = 10 billion gallons
PE = 1 + 0.3(10) or 5 – 0.1(10) = $4 per gallon
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