Market Demand and market supply equations are given as:
qD = 200 -p,
qS = 120 + p.
At price of Rs. 25, there will be?
Answer & explanation
Correct answer: option 1
The correct answer is Option 1: Excess demand
Putting p = 25, in equation for demand, we get,
qd = 200-p
= 200- 25 = 175
and qs = 120 + 25 = 145
This clearly shows that Qd> Qs. This means there is excess demand at price = 25.