Economics 9708 · AS & A Level · Income elasticity of demand

Income elasticity of demand — practice question

For a product, the quantity demanded (QD) is given by QD = 400 – 20P, where P is the price in dollars, and the quantity supplied (QS) is QS = 100 + 40P. What conclusion can be drawn about the market at a price of $5?

  • AConsumers will face a shortage.
  • BGovernment will intervene in the market.
  • CProducers will have a surplus of the product.
  • DThe market will be in equilibrium.

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