Read the following passage and answer the questions.
Suppose there is a market consisting of identical firms producing the same quality of salt.
Suppose the market demand curve and the market supply curve for salt are given by:
$Q_D=350-p$ for $0 ≤ p ≤ 350$
= 0 for p > 350
$Q_S = 220 + p$ for $p ≥ 10$
= 0 for 0 ≤ p < 10
Where $Q_D$ and $Q_S$ denote the demand for and supply of salt (in kg) respectively and p denotes the price of salt per kg in rupees.
If the government imposes a price ceiling of Rs 31 on salt, what will be the volume of excess demand/ supply in the market?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Excess demand of 68 units.
$Q_D=350 - p$
$Q_S = 220 + p$
Price ceiling p=31
$Q_D= 350 -31 = 319
$Q_S = 220 + 31 = 251
Excess Demand= 319 - 251 = 68