Market demand is given as Q_D= 140 - 5P.Market supply is given as Q_S= 2P.Which legally imposed price would constitute a binding price floor

Question

Quizplus · Accepted Answer

To find the binding price floor, we need to first set the quantity demanded equal to the quantity supplied and solve for the price. Q_D= 140 - 5P = Q_S= 2P 140 - 5P = 2P 140 = 7P P = $20 However, this is not a binding price floor because it is below the equilibrium price ($28), so let's try the next higher option which is $25. 140 - 5($25) = 2($25) 115 = 50 This is not true and indicates that quantity supplied is less than quantity demanded at the price of $25, which means a legal price floor of $25 would be binding.

Market Demand Is Given as QD = 140 - 5P

Market Demand Is Given as Q_D= 140 - 5P