Question

In: Economics

The households have the following supply of labor and demand for sub sandwiches Qd = 3300...

The households have the following supply of labor and demand for

sub sandwiches
Qd = 3300 k -200 kP

The firms have the following demand for labor and supply of sub sandwiches
Qs= -700 k + 800 kP

To solve the problem of poverty, the governent puts a price ceiling on sub sandwiches of 3

1. Find the quantity supplied of sub sandwiches
2. Find the quantity demanded of sub sandwiches

3. Find the difference and identify.
4. Illustrate with a supply and demand diagram showing the ceiling.

Expert Solution

At Pice ceiling of 3 but by Solving Qd and Qs Solution we know that equilibrium price is 4

At Equilibrium Qd=Qs

3300k-200kP=-700k+800kP

P=4

1. Qs = -700k + 800 k*3 (Quantity supplied)

= Qs = 1700k

2. Qd = 3300k - 200k*3 (Quantity demanded)

= Qd = 2700k

So. basically there is higher demand due to ceiling price being lower than the equilibribrium price.

3.Qd is greater than Qs by 1000 units.

4.

There will be shortage of sub sandwitches because of price ceing of 3

Rahul Sunny answered 2 years ago

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