Question
if demand=500-p and supply=300+p what is equlibrium price/quantity if there is a quota restricting more than 50 units to be sold?
Answers
economyst
With the quota, do you mean "NO more than 50"?
Without the quota, the equilibrium price and quantity would be where supply=demand or (500-p)=(300+p) -- solve or p. I get p=100, ergo Qd=Qs=400.
If more than 50 must be sold, no problemo. If no more than 50, and the quota is enforced, then price will go to 450 and some lucky sellers will make a bundle.
Without the quota, the equilibrium price and quantity would be where supply=demand or (500-p)=(300+p) -- solve or p. I get p=100, ergo Qd=Qs=400.
If more than 50 must be sold, no problemo. If no more than 50, and the quota is enforced, then price will go to 450 and some lucky sellers will make a bundle.