Suppose the demand and supply curves of a commodity are given by:

q_D = 1,500 + p

q_S = 500 + 2p

At which of the following prices will there be excess supply?

1500

The correct answer is option 2: 1500

At equilibrium, market supply = market demand.

Equating them, we get 1500+p = 500+ 2p

i.e. 1500-500 = 2p - p

1000 = p

At prices greater than equilibrium price, there is excess supply. The only option with value greater than 1000 is second option. So it is the answer.

• 1000: At this price, qS = qD, so there is no excess supply.
• 1500: This price is greater than 1000, so there will be excess supply.
• 900: This price is less than 1000, so there will be excess demand.
• 850: This price is less than 1000, so there will be excess demand.