Suppose that demand in the market for good X is given by the equation e-30-p and

Question

Suppose that demand in the market for good X is given by the equation e-30-p and that supply in the market for good X is given by the equation -2p a. Refer to Equations. What are the equilibrium price and quantity in the market for good X? b. Refer to Equations,.If the government set a price ceiling at S8, would there be a shortage or surple how large would be the shortage/surplus? c. Refer to Equations. If the government set a price floor at $13, would there be a shortage or surplu how large would be the shortage/surplus?

Explanation / Answer

A) Use the fact that equilibrium has Qd = Qs

30 - P = 2P

30 = 3P

P = $10 and Q = 2*10 = 20 units. Thus the equilibrium price is $10 and quantity is 20 units

B) At a ceiling price of $8, Qd = 30 - 8 = 22 units and Qs = 2*8 = 16 units. Hence there is a shortage of 22 - 16 = 6 units

C) At a price floor of P = $13, Qd = 30 - 13 = 17 units and Qs = 2*13 = 26 units. Hence there is a surplus of 26 - 17 = 9 units

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