Given qD = 2,000 -p and qS = 200 + 2p. What will be the algebraic expression for excess demand?
Answer & explanation
Correct answer: option 2
The correct answer is option 2: 1800 -3p
Excess demand is demand minus supply.
So, Qd - Qs = 2000 - p - (200 + 2p)
=2000 - p - 200-2p
= 1800 -3p.
Thus, Excess Demand=1800 -3p
At equilibrium price, this excess demand will be zero.
For the given question, equilibrium price will be 600.
Putting p = 600 in excess demand equation of 1800 - 3p, we get zero excess demand.