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Demand Curve: P=300-Qd Supply Curve: P=30+2Qs What is the effect of a price ceiling at P=230?...

Demand Curve: P=300-Qd

Supply Curve: P=30+2Qs

What is the effect of a price ceiling at P=230? What is the effect of a price floor at P=110?

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Answer #1

No effect

No Effect.

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the market is in equilibrium at Qd=Qs

equating both equations

300-Q=30+2Q

3Q=270

Q=90

P=300-90=$230

the $230 is the equilibrium price.

The price ceiling is a maximum price can a seller charge and it is effective if the price ceiling is below the equilibrium price.

It is equal to the equilibrium price. the price ceiling will not have any effect on the equilibrium.

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A price floor is effective if it is above the equilibrium price as it is a minimum price a seller can charge.

The price floor is below equilibrium price so it is not effective.

the market will not have any effect of the price floor.

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