Question

The market for gravel has been estimated to have these supply and demand relationships:

Demand: Qd = 10,000 - 100P

Supply: Qs = 100P - 1,000

where P represents price per unit in £, and Q represents sales per week in tons. Determine the amount of shortage or surplus that would develop at P = £40/ton.

Answer 1

At $P = \pounds 40/ton$

Demand, $Q_{d} = 10,000-100\times40=10,000-4000=6,000$

Supply, $Q_{s} = 100\times40-1000=4000-1000=3000$

Demand is greater than supply

the shortage is $6000-3000=3000$