A competitive market with demand Q = 120 - 4P and supply Q = -30 + 2P is in equilibrium.If government imposes a price floor of 26,what quantity will be traded on the market?

Question

Quizplus · Accepted Answer

A price floor of 26 means the price cannot go below 26. At P = 26, demand Q = 120 - 4(26) = 16 and supply Q = -30 + 2(26) = 22. Since the price floor is above the equilibrium price, the quantity traded will be the lesser of demand and supply, which is 16.

A Competitive Market with Demand Q = 120 - 4P