Market demand is given as Q_D= 280 - 4P.Market supply is given as Q_S= 2P + 40.Which legally imposed price would constitute a binding price ceiling

Question

Quizplus · Accepted Answer

To determine the binding price ceiling, we need to set the price such that it is below the equilibrium price. The equilibrium price is found by setting market demand equal to market supply, which is:

280 - 4P = 2P + 40

Solving for P, we get:

6P = 240

P = 40

Therefore, any price below $40 would be a binding price ceiling. The only option below $40 is $30, so the correct answer is A) $30.

Market Demand Is Given as QD = 280 - 4P

Market Demand Is Given as Q_D= 280 - 4P