Use the table below to answer questions 1 and 2. Price Quantity Demanded Quantity Supplied $8...

Use the table below to answer questions 1 and 2.

Price Quantity Demanded Quantity Supplied
$8 200 1,000
$6 400 800
$4 600 600
$2 800 400
1. Setting a price floor of $8 would cause a market surplus in the amount of:
a. 400 units. b. 500 units. c. 600 units. d. 800 units.

2. Setting a price ceiling of $2 would cause a market shortage in the amount of:
a. 400 units. b. 500 units. c. 600 units. d. 800 units.

Expert Solution

Q1. Answer is d. 800 units.

The explanation is as follows: At price $ 8,

Quantity supplied: 1,000 units

Less: Quantity demanded: 200 units

Market surplus: 800 units

Q2. Answer is a. 400 units

The explanation is as follows: At price $ 2,

Quantity demanded : 800 units

Less: Quantity supplied: 400 units

Market shortage: 400 units

Rahul Sunny answered 1 year ago

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