Question

QUESTION 35 Table: The Market for Soda Market for a Can of Soda Price Quantity Demanded Quantity Supplied ($/unit) (cans) (cans) 0.50 10 7 0.75 8 8 1.00 9 1.25 10 1.50 2. 11 6 4 Assuming the government sets a price ceiling of $1.25, how many sodas will be sold? 07 OS 10 O 11

Answer 1

Answer 35

Equilibrium in the market occurs quantity demand = quantity supplied. We can see from above table that quantity demand = quantity supplied = 8 when price = 0.75. Thus, Equilibrium quantity = 8 units and equilibrium Price or Market price = $0.75.

Now price ceiling is set at $1.25. This means that price can not go above $1.25 but can be below $0.75 and thus price ceiling is not binding. As price can be below price ceiling price(i.e. $1,25), thus equilibrium price is attainable and thus equilibrium price will prevail in the market and number of quantities bought and Sold = Equilibrium quantity(i.e. quantity demand = quantity supplied) = 8 units.

Thus, Amount of Sodas sold = 8

Hence, the correct answer is (b) 8