Market demand is given as QD = 100 - 2P.Market supply is given as QS = P + 10.Which legally imposed price would constitute a binding price floor?
A) $60
B) $45
C) $30
D) $15

Question

Market demand is given as QD = 100 - 2P.Market supply is given as QS = P + 10.Which legally imposed price would constitute a binding price floor?  
A) $60 
B) $45 
C) $30 
D) $15

Quizplus · Accepted Answer

To find the legally imposed price that would constitute a binding price floor, we need to set the market supply equal to the demand, as at this point there would be excess supply. 
100 - 2P = P + 10 
3P = 90 
P = 30 
So the equilibrium price is $30, and any price above that would be a binding price floor. Among the given options, $45 is the only one that is above the equilibrium price, and therefore it is a binding price floor.

Market Demand Is Given as QD = 100 - 2P