Market Demand and market supply equations are given as:
qD = 200 – p
qS = 120 + p
If the prevailing market price is Rs. 40, then there will be ________ in the market.
Answer & explanation
Correct answer: option 3
the correct answer is Option 3: Equilibrium
Putting price = 40 in both the equations.
qd = 200 – p = 200 – 40 = 160.
qs = 120 + p = 120 + 40 = 160.
Since qd = qs, there is equilibrium at price of Rs. 40