In the market for cotton, the quantity demanded and quantity supplied are expressed mathematically as Q^D = 400 - 250P and Q^S = 250P - 100, where P is the price per pound of cotton and Q measures pounds of cotton. Suppose the government sets a price ceiling of $0.50 per pound of cotton. As a result of the price ceiling, there is a shortage of: A) 250 pounds of cotton. B) 200 pounds of cotton. C) 150 pounds of cotton. D) 100 pounds of cotton.

Question

Quizplus · Accepted Answer

At a price ceiling of $0.50 per pound, the quantity demanded is Q^D = 400 - 250(0.50) = 150 pounds, while the quantity supplied is Q^S = 250(0.50) - 100 = 100 pounds. Therefore, there is a shortage of 150 - 100 = 50 pounds of cotton.

In the Market for Cotton, the Quantity Demanded and Quantity