Question

Consider a market where the demand curve is downward sloping and the supply curve is upward sloping (so they are neither vertical nor horizontal). If the consumers' willingness to pay for the hundredth unit and the seller's willingness to accept for the 175th unit are both $5.00, then:______

Answer 1

Answer:

Possible options are:

A. The equilibrium price is $5.00

B. The equilibrium, quantity is 100 units

C. There is an excess supply of 75 units at $5.00

D. There is an excess demand of 75 units at $5.00

Answer: C. There is an excess supply of 75 units at $5.00

Explanation:

The slope of the demand curve (downward to the right) indicates that a greater quantity will be demanded when the price is lower. On the other hand, the slope of the supply curve (upward to the right) tells us that as the price goes up, producers are willing to produce more goods.

In this situation, If the consumers' willingness to pay for the hundredth unit and the seller's willingness to accept for the 175th unit are both $5.00, then it means there is an excess supply of 75 units at $5.00