Consider a market where the demand and supply for the good are described by the following equations: 

Question

Consider a market where the demand and supply for the good are described by the following equations: begin mathsize 14px style straight Q subscript straight D space equals space 225 space minus space 3 straight P end style and begin mathsize 14px style straight Q subscript straight S space equals space minus space 22.5 space plus space 1.5 straight P end style If the government implements a price ceiling of $45, this will result in…

Answer (Expert Verified)

Based on the supply and demand expressions given, and the price ceiling imposed, the result would be a shortage of 45 units.

The given expressions are:
Qd = 225 + 22.5

Qs = -22.5 + 1.5p

What would be the equilibrium price?

Quantity supplier = Quantity demanded

-22.5 + 1.5p = 225 – 3p

1.5p + 3p = 225 + 22.5

4.5p = 247.50

p = 247.50 / 4.5p

p = $55

What is the shortage or surplus?

Shortage = Quantity demanded – Quantity supplied

= (225 + 22.5 x 55) – (-22.5 + 1.5 x 55)

= 90 – 45

= 45 units

There will be a shortage of 45units.

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