Multiple Choice
The supply and demand curves for a product are as follows. What is quantity supplied if a price ceiling of \$4 is set?
QD = 600 - 100P
QS = -150 + 150P
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5. Consumer and Producer Surplus; Price Ceilings and Floors
Quantitative Analysis of Price Ceilings and Price Floors: Finding Points
Multiple Choice
The supply and demand curves for a product are as follows. What is quantity demanded if a price floor of \$21 is set?
QD = 45 - 2P
QS = -15 + P
A
2
B
3
C
4
D
5
E
6
Verified step by step guidance1
Understand the concept of a price floor: A price floor is a minimum price set by the government, below which the price of a good cannot fall. It is typically set above the equilibrium price to be effective.
Identify the given equations: The demand equation is QD = 45 - 2P, and the supply equation is QS = -15 + P.
Substitute the price floor into the demand equation: Since the price floor is set at \$21, substitute P = 21 into the demand equation to find the quantity demanded.
Calculate the quantity demanded: Use the equation QD = 45 - 2(21) to determine the quantity demanded at the price floor.
Interpret the result: The calculated quantity demanded will show how much of the product consumers are willing to buy at the price floor of \$21, which may differ from the equilibrium quantity if the price floor is binding.
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