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A market's demand and supply curves are given by:
Qd = 400 - 3P
Qs = 100 + 2P
where Qd is quantity demanded, Qs quantity supplied, and P is the price.
a. Suppose the government enacts a price ceiling of $60. What is the quantity demanded and supplied? Is the market characterized by a shortage?
b. Suppose that supply conditions in the market change to Qs = 80 + 2P. Given the price ceiling of $60, what happens to quantity demanded and quantity supplied? Is the market characterized by a shortage? How much are consumers willing to pay per unit for the quantity transacted?
Nominal Rate of Interest
The rate of interest before adjusting for inflation, reflecting the rate at which money grows over time.
Purchasing Power
A measure of the amount of goods or services that one unit of currency can buy.
Inflation Rate
The annual percentage rate at which the general level of prices for goods and services is rising, eroding purchasing power.
Probability Distribution
A statistical method charting all conceivable values and odds for a random variable over an agreed-upon range.
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