We know that the market demand equation for gasoline is Qd = 80 - P, and...
We know that the market demand equation for gasoline is Qd = 80 - P, and the market supply equation for gasoline is Qs = 20 + 4P. Suppose that due to natural resource constraints or government regulation, the market supply of gasoline cannot exceed 40. Whats is the new market equilibrium price?
A. Q = 80
B. Q = 40
C. Q = 58
D. Q = 68
Homework Answers
Correct Answer:
B. P = $40 (Q should be replaced by P in the given alternative)
Working note:
Since market supply cannot exceed 40 units,
Then,
Qd = 40 = 80-P
P = 80-40
P = $40
So, new equilibrium price is $40.
Add Answer to:
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