Question

Equilibrium price is \$100. Qd = Qs i.e. 400-P = 3P.

Equilibrium quantity is 300 units. Put the value of equilibrium price either in Qd or Qs.

A price ceiling is the legal maximum price for a good. The price ceiling is less  (i.e. below the equilibrium level)

Market price will be \$80.

Quantity supplied will be less (i.e.3P= 3*80 = 240 units.)

Quantity demanded will be more (i.e. 400-P= 400-80 = 320 units).

Price ceiling results in Shortage when it is less than the equilibrium price and in surplus if it is above the equilibrium.

A price floor is a minimum price at which a product is permitted to sell. The price floor is less  (i.e. below the equilibrium level)

Market price will be \$100.

Quantity supplied will be same (i.e.3P= 3*100 = 300 units.)

Quantity demanded will be more (i.e. 400-P= 400-100 = 300 units).

Price floor results in no change when its below the equilibrium price and in surplus if it is above the equilibrium.

With tax, market price will be \$130 (i.e. Qd = Qs; 3P-120 = 400-P)

Quantity supplied will be less than eequilibrium level (i.e.3P-120 = 3*130-120 = 270 units.)

Quantity demanded will be less than eequilibrium leve (i.e. 400-P= 400-130 = 270 units).

The tax will results in new equilibrium.

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