The General Linear Demand Function Below Is Used to Answer $Q _ { d } = a + b P + c M + d P _ { R }$

question 84

Multiple Choice

The general linear demand function below is used to answer questions :
$Q _ { d } = a + b P + c M + d P _ { R }$
where Q_d = quantity demanded, P = the price of the good, M = income,
$P _ { R }$ = the price of a good related in consumption.
-If the current price of a good is $10, market demand is $Q _ { d } = 400 - 20 P$ , and market supply is $Q _ { s } = - 50 + 10 P$ , then

• A) more of the good is being produced than people want to buy.
• B) a lower price will increase the shortage.
• C) at the current price there is excess demand, or a shortage, of 150 units.
• D) Both b and c
• E) All of the above

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Definitions:

Values

In economics, values refer to the importance or worth that is attached to goods or services, influencing their price and demand in the market.

Implicit Costs

The opportunity costs that are not directly paid for in dollars but represent the loss of benefits from the next best alternative when resources are not used in their best alternative use.

Mental Accounting

A concept in behavioral economics where individuals categorize and treat money differently depending on its source, intended use, or other psychological factors.

Irrational Behavior

Actions or decisions that do not logically follow from a rational analysis of the situation.