Question

At a price of $40, the quantity demanded is 100 and the quantity

supplied is 120. This means that?
A. There is a surplus of widgets at $40, hence the price of
widgets will go down.
B. A price floor is preventing the price of widgets from falling.
C.Both A and B are possibly correct
D. None of the above

Answer 1

At a price of $40, there is a surplus of widgets. The quantities demanded and supplied at $120 cannot be determined based on the given information.

Step-by-step explanation:

At a price of $40, the quantity demanded is 100 and the quantity supplied is 120. This means there is a surplus of widgets at $40, indicating that the quantity supplied exceeds the quantity demanded. Therefore, option A is correct as there is a surplus of widgets at $40, and the price of widgets will likely go down to encourage demand.

To determine the quantities demanded and supplied at a price of $120, we would need more information about the supply and demand curves. However, based on the information given, we cannot determine the exact quantities or if there would be a shortage or surplus at this price.