Scenario: Pizza Supply and Demand.
The demand for pizza is represented by p^D = 10 - Q^D/4, and the supply of pizza is represented by P^S = 4+ Q^s/2, with Q in thousands and P in dollars. The market for pizza is perfectly competitive.
Suppose a price ceiling was set $2 below the equilibrium price. What would be the result?
• There would be a surplus of 12000.
• This is a nonbinding price ceiling.
• Quantity demanded would equal 4000.
• There would be a shortage of 12000.