In a competitive market, the market demand is Qd = 60 - 6P and the market...

Question

Question

In a competitive market, the market demand is Qd = 60 - 6P and the market supply is Qs = 4P. The full economic price under a price ceiling of $3 is?

The answer is "8", but how do you get there?

business economics

Answer 1

✔ Recommended Answer

Answer #1

The full economic price = price ceiling + Non pecuniary price

Non pecuniary price =

Amount supplied at the price ceiling: 4*3 = 12

The price consumers pay at this supply: 12=60-6P or P = 8

Full economic price = 3+(8-3) = $8

Answer 2

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