Market Demand and market supply equations are given as:

q_D = 200 – p

q_S = 120 + p

If the prevailing market price is Rs. 40, then there will be ________ in the market.

Equilibrium

the correct answer is Option 3: Equilibrium

Putting price = 40 in both the equations.

q_d = 200 – p = 200 – 40 = 160.

q_s = 120 + p = 120 + 40 = 160.

Since q_d = q_s, there is equilibrium at price of Rs. 40