daily spot oil price is determiined by the supply and demand in the global marke

Question

daily spot oil price is determiined by the supply and demand in the global market. if global demand is a exponentially declining function of the pirce, and supply is an exponentially increasing function of price, use Goal Seek to determine the equilibrium price-supply and demand are equal-of a barrel of oil.

[demand]                                                   [supply]

25000000 *Exp (-0.25*price) = 6000000*exp(0.013863*Price)



equilibrium qantity = __________?

Equilibrium Price = __________?

Explanation / Answer

for the equilibrium price we'll have to solve the above equation for the price.

Let's denote Price by the letter P , for ease of calculation

=> 25000000 *Exp (-0.25*P) = 6000000*exp(0.013863*P)

25e^(-.25P) = 6e^(0.013863P)

take log with base e on both sides

=> ln(25) + ln[e^(-.25P)] = ln(6) + ln[e^(0.013863P)]

ln[25/6] -.25P = 0.013863P

P = 5.40855

now quantity in demand would be

25000000 *Exp (-0.25*price) = 25000000 *Exp (-0.25*5.40855) = 6467168.15973128815335 = 6467168

hence the equilibrium quantity will be = 6467168 barrels

we could use the supply function as well to find the equilibrium quantity.

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.