Question

Suppose that the demand curve for wheat is Upper Q equals 120 minus 10 p and the supply curve is Upper Q equals 10 p. The government imposes a price ceiling of p overbar equals $ 4 per unit. a. How do the equilibrium price and quantity​ change? ​(round quantities to the nearest integer and round prices to the nearest​ penny) The equilibrium quantity without the price ceiling is nothing and the price without the price ceiling is ​$ nothing. The equilibrium quantity with the price ceiling is nothing.

Answer 1

$6; 60 units

40 units

Step-by-step explanation:

Given that,

Demand curve: Q = 120 - 10P

Supply curve: Q = 10P

Government imposes a price ceiling = $4 per unit

Without price ceiling,

At equilibrium,

Supply = Demand

10P = 120 - 10P

20P = 120

P = $6 (equilibrium price)

Equilibrium quantity = 120 - (10 × 6)

= 120 - 60

= 60 units

With price ceiling of $4 per unit,

Equilibrium quantity:

= 10P

= 10 × 4

= 40 units