Suppose That the Demand and Supply Curves for a Good

question 133

Multiple Choice

Suppose that the demand and supply curves for a good are given by Q^D = 1,000/P and Q^S = 10P. What is happening in the market at a price of $20?

• A) There is an excess demand of 480 units.
• B) There is an excess demand of 150 units.
• C) There is an excess supply of 480 units.
• D) There is an excess supply of 150 units.

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Definitions:

Desired Money Holdings

This is the quantity of money individuals prefer to keep available for immediate transactions or precautionary purposes.

Initial Equilibrium

The starting point at which supply and demand are in balance before any external changes affect the market.

Interest Rate

The fee, shown as a percent of the principal, that a lender imposes on a borrower for the utilization of assets.

Government Spending

Financial expenditures by the government, including investments, consumption, and transfer payments, aimed at influencing the economic activity.