BASED ON THE INFORMATION BELOW WHAT IS THE ECONOMIC PRICE Suppose demand and sup

Question

BASED ON THE INFORMATION BELOW WHAT IS THE ECONOMIC PRICE

Suppose demand and supply are given by Qd = 50 - P and Qs = 0.5P - 10.

a. What are the equilibrium quantity and price in this market?

Equilibrium quantity: 10

Equilibrium price: $ 40

b. Determine the quantity demanded, the quantity supplied, and the magnitude of the surplus if a price floor of $46 is imposed in this market.

Quantity demanded: 4

Quantity supplied: 13 Surplus: 9

c. Determine the quantity demanded, the quantity supplied, and the magnitude of the shortage if a price ceiling of $30 is imposed in the market.

Also, determine the full economic price paid by consumers.

Quantity demanded: 20

Quantity supplied: 5 Shortage: 15

Explanation / Answer

Full economic price is the price such that Quantity demanded = 5 units = Quantity supplied

therefore 5 = 50 - P

             P = 50 - 5

             P = $45

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