Can you tell which one is correct: Scenario 2.1: The demand for books is: Q d =

Question

Can you tell which one is correct:

Scenario 2.1:

The demand for books is: Qd = 120 - P
The supply of books is: Qs = 5P


Refer to Scenario 2.1. If P = $ 15 which of the following is true?

Answers:

A.

There is a surplus equal to 30.

B.

There is a shortage, but it is impossible to determine how large.

C.

There is a surplus, but it is impossible to determine how large.

D.

There is a shortage equal to 30.

Can you tell which one is correct:

Scenario 2.1:

The demand for books is: Qd = 120 - P
The supply of books is: Qs = 5P


Refer to Scenario 2.1. If P = $ 15 which of the following is true?

Answers:

A.

There is a surplus equal to 30.

B.

There is a shortage, but it is impossible to determine how large.

C.

There is a surplus, but it is impossible to determine how large.

D.

There is a shortage equal to 30.

Explanation / Answer

Qd= 120-P

Qs=5P

At equilibrium Qd=Qs

120-P = 5P

120= 6P

P=$ 20 (Equilibrium price)

Q= 5P= 5(20)= 100 units. (Equilibrium quantity)

At price , P=$15

Qs= 5(15)= 75 units

Qd = 120-15= 105 units

Because quantity demanded is more than quantity supplied. Qd>Qd

So, there is a shortage = (105-75)= 30 units.

Hence, option(D) is correct.

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