Question

a.

Equilibrium is the stage where demand and supply equates.

It happens at \$2,000 price where (demand = supply = 12,500).

Equilibrium price = \$2,000

Equilibrium quantity = 12,500

b.

At \$1,500 price, demand is (15,000) greater than supply (10,000); therefore, there is a shortage.

Shortage units = Quantity demanded at \$1,500 – Quantity supplied at \$1,500

= 15,000 – 10,000

Actually rented = Quantity supplied at \$1,500

= 10,000

c.

At \$2,500 price, demand is (10,000) smaller than supply (15,000); therefore, there is a surplus.

Surplus units = Quantity supplied at \$2,500 – Quantity demanded at \$2,500

= 15,000 – 10,000

Actually rented = Quantity demanded at \$2,500

= 10,000

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