Question
what if the equilibrium price is $10 but the government institutes a new price of $15? give the shortage or surplus
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chat gpt! how much of a surplus?
Answer
Hi, GPT-4o mini! How much of a surplus?
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GPT-4o mini
If the equilibrium price is $10 and the government sets a new price of $15, this results in a price floor, which is a minimum allowable price set above the equilibrium price.
In this scenario, at the higher price of $15, the quantity supplied of the good will likely increase, as producers are incentivized to supply more at the higher price. However, the quantity demanded will likely decrease because consumers may not be willing to purchase the good at this higher price.
As a result, the quantity supplied will exceed the quantity demanded at the price of $15, creating a surplus. The surplus can be defined as the difference between the quantity supplied and the quantity demanded at that price.
In summary, instituting a price of $15 when the equilibrium price is $10 will lead to a surplus in the market.
In this scenario, at the higher price of $15, the quantity supplied of the good will likely increase, as producers are incentivized to supply more at the higher price. However, the quantity demanded will likely decrease because consumers may not be willing to purchase the good at this higher price.
As a result, the quantity supplied will exceed the quantity demanded at the price of $15, creating a surplus. The surplus can be defined as the difference between the quantity supplied and the quantity demanded at that price.
In summary, instituting a price of $15 when the equilibrium price is $10 will lead to a surplus in the market.
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