Consider a market consisting of two farms producing same quality of jowar. The market demand curve and the market supply curve for rice are given by:
qD = 250 – p
qS = 150 + p
At price of 125, there will be
Answer & explanation
Correct answer: option 3
The correct answer is option 3: Excess Supply
Putting p = 125 in both equations of demand and supply.
Qd= 250-p
=250-125
= 125.
Qs = 150+p
= 150 + 125
= 275.
Since supply is greater than demand, there will be excess supply of 150 (275-125) at the price of 125.