Suppose that supply is fixed at 100 units and demand is Q = 500 - P. A price ceiling of $100 creates a shortage of 400 units.

Question

Quizplus · Accepted Answer

If the supply is fixed at 100 units and demand is Q = 500 - P, then at a price of $100, the quantity demanded would be 400 units (Q = 500 - 100 = 400). Since supply is fixed at 100 units, a price ceiling of $100 would mean that buyers would want to purchase 400 more units than are available, resulting in a shortage of 300 units (400 - 100 = 300), not 400 units as given in the statement. Therefore, the statement is false.

Suppose That Supply Is Fixed at 100 Units and Demand