Suppose market demand and supply are given by Qd 100 2P an

Suppose market demand and supply are given by Qd = 100 – 2P and QS = 5 + 3P. If a price ceiling of $10 is imposed:

A.there will be a surplus of 45 units.

B.there will be neither a surplus or shortage.

C. there will be a shortage of 45 units.

D. there will be a shortage of 18 units.

Qd = 100 -2P and Qs = 5 +3P

If price ceiling of $10 is imposed, it means that price is forced to be 10 and is not decided by the equilibrium of demand and supply.

In equilibrium Qd = Qs

100 - 2P = 5 +3P

5P = 95, P = 95/5 = 19 (equilibrium market price)

Now with price ceiling price is set as $10 (less than equilibrium price), in such case demand would be much higher than supply.

Qd = 100 - 2(10) = 80

Qs = 5 +3(10) = 35

SHORTAGE = 80-35 = 45 (option C).