Use the supply and demand equations to following question.Qs = 3PQd = 10 - PA minimum price of $6.00 in the market described by these equations would result inQuestion 7Select one:a.excess demandb.excess supply of 14 unitsc.quantity traded of 18 unitsd.no change in the market as the floor is not binding at equilibrium.
Question
Use the supply and demand equations to following question.Qs = 3PQd = 10 - PA minimum price of $6.00 in the market described by these equations would result inQuestion 7Select one:a.excess demandb.excess supply of 14 unitsc.quantity traded of 18 unitsd.no change in the market as the floor is not binding at equilibrium.
Solution
To answer this question, we first need to find the equilibrium price and quantity, where the quantity supplied (Qs) equals the quantity demanded (Qd).
The supply equation is Qs = 3P and the demand equation is Qd = 10 - P.
Setting these two equations equal to each other gives us:
3P = 10 - P
Solving for P (price), we get P = 2.5.
Substituting P = 2.5 into either the supply or demand equation will give us the equilibrium quantity. Let's use the supply equation:
Qs = 3P = 3(2.5) = 7.5
So, the equilibrium price is $2.5 and the equilibrium quantity is 7.5 units.
Now, let's consider a minimum price (or price floor) of $6.00.
If the price floor is above the equilibrium price, it is binding and will have an effect on the market. Since 2.5, the price floor is binding.
At a price of $6.00, we can find the quantity supplied and quantity demanded:
Qs = 3P = 3(6) = 18
Qd = 10 - P = 10 - 6 = 4
So, at a price of $6.00, the quantity supplied is 18 units and the quantity demanded is 4 units.
This results in an excess supply (or surplus) of 18 - 4 = 14 units.
Therefore, the correct answer is b. excess supply of 14 units.
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