Answered

If the demand function is Qd = 600 – 50P, and the supply function is Qs = –400 + 150P, calculate the shortage or surplus at a price of $4. Typing only the words shortage or surplus is insufficient, you also need to enter the size of the shortage or surplus.

Answer :

Answer:

There will be a shortage of 200 units at price of $4.

Explanation:

The demand function is given as,

Qd = 600 – 50P.

The supply function is given as,

Qs = –400 + 150P

The equilibrium price will be where both quantity demanded and quantity supplied will be equal.

Qd = Qs

600 – 50P =  –400 + 150P

1000 = 200P

P = $5

Putting the value in demand function

Qd = 600 – 50 × 5

Q = 350

The equilibrium quantity is 350 units.

At price $4, the quantity supplied will be,

= –400 + 150 × 4

= 200

The quantity demanded will be

= 600 – 50 × 4

= 400

The quantity demanded is greater than the quantity supplied. This implies that there is a shortage in the market.

The shortage in the market will be

= Qd - Qs

= 400 - 200

= 200

There is a shortage of 200 units.

Other Questions