Question
Asked Nov 15, 2019
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QUESTION 6
Refer to the accompanying figure to answer the questions that follow.
Price
P3
P2
P1
Quantity
37,500 50,000 68,000 80,000 100,000
The market is currently at market equilibrium. If a binding price ceiling of P 1 is imposed, by how much would the
quantity demanded change?
a. It would increase by 30,500 units.
b. It would increase by 30,000 units.
c. It would decrease by 12,000 units.
d. It would increase by 12,000 units.
e. It would decrease by 30,500 units.
OOOO
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QUESTION 6 Refer to the accompanying figure to answer the questions that follow. Price P3 P2 P1 Quantity 37,500 50,000 68,000 80,000 100,000 The market is currently at market equilibrium. If a binding price ceiling of P 1 is imposed, by how much would the quantity demanded change? a. It would increase by 30,500 units. b. It would increase by 30,000 units. c. It would decrease by 12,000 units. d. It would increase by 12,000 units. e. It would decrease by 30,500 units. OOOO

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Expert Answer

Step 1

It is given that initially the market is in equilibrium. Equilibrium exists at the point where the quantity demanded is equal to the quantity supplied. There is neither excess demand nor excess supply in the economy. In this case, equilibrium exists at price Pand quantity 68,000 units

Step 2

The quantity demanded can be determined by the intersection of the price line and the demand curve. At equilibrium, the quantity demanded is 68,000 un...

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