Assume the quantity demanded of Strawberry Coke Zero is dete

Assume the quantity demanded of Strawberry Coke Zero is determined as follows Q_d = 60 - P and the quantity supplied is determined as follows Q_s= 4P - 40 If Georgia state passed a law that the price for a Strawberry coke zero should be $10. Is ther a shortage or a surplus and by how much If Georgia state passed a law that the price for a Strawberry coke zero should be $40. Is there a shortage or a surplus and by how much

Solution

The equilibrium condition is, Qd = Qs

60 – P = 4P – 40

5P = 100

P = 20

Putting the value of P in either Qd or Qs for getting the Q

60 – P = 60 – 20 = 40

Therefore, the equilibrium price is $20 and quantity is 40 units.

a.

If the price is $10, Qd = 60 – P = 60 – 10 = 50

Qs = 4P – 40 = 4 × 10 - 40 = 0

Shortage = Qd – Qs = 50 – 0 = 50

b.

If the price is $40, Qd = 60 – P = 60 – 40 = 20

Qs = 4P – 40 = 4 × 40 - 40 = 120

Surplus = Qs – Qd = 120 – 20 = 100