**Demand and Supply Analysis****Demand Curve**: $ P = 300 - Q_d $**Supply Curve**: $ P = 30 + 2Q_s $**Question**: What is the effect of a price floor at $ P = 110 $?- ○ **No Effect**- ○ **Shortage = 150**- ○ **Surplus = 150**- ○ **Cannot be determined.**---**Explanation**:The given demand curve equation $ P = 300 - Q_d $ indicates the relationship between price (P) and quantity demanded ($ Q_d $). As price decreases, quantity demanded increases.The supply curve equation $ P = 30 + 2Q_s $ indicates that as price increases, quantity supplied ($ Q_s $) also increases.A **price floor** is a minimum price set by the government, below which prices are not allowed to fall. This exercise asks for the impact of setting a price floor at $ P = 110 $.**Using the Equations**:1. **Demand at Price Floor**: \[ 110 = 300 - Q_d \implies Q_d = 190 \]2. **Supply at Price Floor**: \[ 110 = 30 + 2Q_s \implies Q_s = 40 \]3. **Effect**: At $ P = 110 $, $ Q_d = 190 $ and $ Q_s = 40 $, indicating a surplus since quantity supplied exceeds quantity demanded.Therefore, the correct option is:- **Surplus = 150** (since $ 190 - 40 = 150 $).The price floor results in a surplus of 150 units because suppliers are willing to produce more than consumers are willing to buy at the set price floor.

Given:Demand curve: P=300-QdSupply curve: P=30+2QsAt equilibrium:Demand=Supply300-Qd=30+2Qs300-30=2Q+Q270=3QQ=2703Q=90Substituting Q=90 in the Demand curve equation,P=300-90P=$210Equilibrium price=$210Floor price=$110A floor price is the minimum price which a seller can charge but it becomes effective only when it is above equilibrium price. Here,Floor price<Equilibrium priceThus, there will be no effect of floor priceAnswer) No effect

Answered: Demand Curve: P=300-Qd Supply Curve:…

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Demand Curve: P=300-Qd Supply Curve: P=30+2Qs What is the effect of a price floor at P=110? No Effect Shortage=150 Surplus=150 Cannot be determined.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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