What is the market equilibrium wheat price per month and the

What is the market equilibrium wheat price per month and the market equilibrium number of wheat demanded and supplied? If the local government can enforce a price-control law that sets the maximum price of $2.00, will there be a surplus or a shortage? Of how many bushels? And how many bushels will actually be sold?

Price

Demand

Supply

5

40

170

4

60

150

3

90

90

2

100

70

1

300

Solution

At market equilibrium point demand = supply

Here at price $3, demand = supply = 90

Hence, per month wheat price is $3 and quantity is 90

Now, as government sets the maximum price of $2 then there will be shortage because at price $2, demand is 100 while supply is 70

Hence, shortage = 30 bushels. Actual number of bushels sold = 70