Suppose the demand and supply curves are given by:
qD = 1,500 + p
qS = 500 + 2p
At price = 800, there will be
Answer & explanation
Correct answer: option 2
The correct answer is Option 2: Excess demand
At equilibrium, market supply = market demand. Equating them, we get
1500+p = 500+ 2p
1500-500 = 2p - p
1000 = p
At prices less than equilibrium price, there is excess demand.
Alternatively, we can put p = 800 in equations of demand and supply to find out which value is greater.