The following equations represent the demand and supply for bird feeders
QD = 35 - P
QS = -5 + 3P
What is the equilibrium price (P) and quantity (Q - in thousands) of bird feeders?
A) P = $35; Q = 20 thousand B) P = $5; Q = 30 thousand
C) P = $10; Q = 25 thousand D) P = $20; Q = 20 thousand
C
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Suppose the equilibrium price of a gallon of milk is $4. If the government imposes a price floor of $5 per gallon of milk,
A) the quantity supplied of milk exceeds the quantity demanded. B) the quantity supplied of milk falls short of the quantity demanded. C) the supply increases. D) the market will not be affected. E) there will be a shortage of milk.
The substitution effect
A) is always larger than the price effect. B) always decreases purchases of a good as the price of a good rises. C) increases purchases of the good as the price rises if the good is a normal good. D) is always smaller than the income effect.