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10 February, 05:42

Suppose that the inverse demand equation is p = 100 minus 2Q and the supply equation is p = 2Q. If the price is controlled at $60 , this is a price floor. In this market, there will be a surplus of nothing units (enter your response as a real number rounded to one decimal place ).

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  1. 10 February, 05:52
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    Answer: P = $50

    Q = 25

    Explanation: P = 100-2Q

    P = 2Q

    To get the quantity supplied Q, we have to educate both equations

    100-2Q=2Q, 100=2Q+2Q

    100=4Q, Q=100/4, Q=25

    To get the equilibrium price we have to substitute the value of Q which is 25 into any of the equation.

    Using equation 1

    P=100-2Q, P=100-2 (25)

    P=100-50, P=$50.

    If the price is controlled at $60, then the production pays the producer this is because a commodity is not expected to be sold at the equilibrium price, price flooring is a way that government or a group control the market price of a commodity or produce by imposing a particular price on it. This is to ensure that the producers are not at loss with their production, a price floor is always higher than the equilibrium price to be effective as seen in the example given above, price floor is $60 while equilibrium price is $50.

    An example of a price floor for services can be seen in the minimum wage stated by the government this is to ensure that people's services are not misused anyhow.

    Price flooring most times can lead to surplus quantity produced if consumers are not willing to pay the price, because the producer will be wiling to produce more in order to make more profit.
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