Question

For a given market, suppose that the quantity demanded is 240 units if the price is $20 and the quantity demanded is 275 units if the price is $16. In addition, the quantity supplied is 240 units if the price is $20 and the quantity supplied is 200 units if the price is $16. If the actual price in the market is $16 then a shortage of 75 units would exist and price would rise.

a. Trueb. False

Answer 1

true

Step-by-step explanation:

Equilibrium is the point at which quantity supplied equals quantity demanded. Above equilibrium price, there would be excess supply and below equilibrium price, there would be excess demanded and a shortage.

Equilibrium price is $20 units and equilibrium quantity s 240 units

When price is $16, demand is 275 and supply is 200 units

Shortage = 275 - 200 = 75 units