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Suppose the current price of a good is $75. At this price, the quantity supplied is 60 units, and the quantity demanded is 120 units. For every $1 increase in price, the quantity supplied increases by 2 units and the quantity demanded decreases by 4 units.

At the current price, the quantity demanded is (greater or less) than the quantity supplied. This means that the market is currently experiencing a_________ . In order to adjust, the market price will_________ until the quantity demanded and quantity supplied are equal. The result is an equilibrium quantity of ________ and an equilibrium price of $ _________.

Respuesta :

Answer:

GREATER, EXCESS DEMAND, RISE, 80 , $85 .

Explanation:

At current situation : Quantity Demanded > Quantity Supplied (120 > 60). This is a situation of Excess Demand

This will lead to  Competition among Buyers , which will Increase the Price.

The Increased Price will imply Increase in Quantity Supplied & Decrease in Quantity Demanded .

This will happen till-  Quantity Demanded = Quantity Supplied

  • The magnitude of change in price, quantity demanded & supplied to establish new equilibrium will be evaluated by -

60 + 2p = 120 - 4p                       [New Equilibrium Quantity]                                                                                      {per unit price change (rise) 'p' leads to +2 in quantity supplied, -4 in quantity demanded}

6p =60p . So , p = 10

Change in Price = 10 ; New Price = 75 + 10 = 85

New Quantity : 60 + 2(10) = 120 - 4(10)  = 80

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