The following figure depicts the demand and the supply for a certain good.

-Refer to the figure above.What kind of price control would induce an excess demand and create a deadweight loss of $625?

Question

The following figure depicts the demand and the supply for a certain good.
 
-Refer to the figure above.What kind of price control would induce an excess demand and create a deadweight loss of $625?

Quizplus · Accepted Answer

A price ceiling at $100 would induce an excess demand of 125 units (325-200) and create a deadweight loss of $625. A price floor would not create an excess demand but rather a surplus. A price ceiling at $150 would not induce any excess demand or deadweight loss as it would not interfere with the market equilibrium.

The Following Figure Depicts the Demand and the Supply for a Certain