In a perfectly competitive market, assume demand and supply curve of commodity Z as follows:
qD = 500 - p,
qS = 350 + 2p.
Excess supply will exist at price of?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → 60
Given:
qD = 500 − p
qS = 350 + 2p
Excess supply exists at any price above the equilibrium price. So find p* first.
\( 500 - p = 350 + 2p \)
\( 3p = 150 \)
\( p^* = 50 \)
Only 60 is above 50. Check at p = 60:
\( q^D = 500 - 60 = 440 \)
\( q^S = 350 + 2(60) = 470 \)
Supply is more than demand, so there is excess supply at a price of 60.
Option (2) 50 — this is the equilibrium price, where the market clears.
Option (3) 40 — this is below 50, so there is excess demand.
Option (4) 45 — this is also below 50, so there is excess demand.
NCERT (2026-27): |
