If the price is £125, what is the amount of surplus or shortage if there is any?

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We start by restating the given item: a price of £125 is set, and we are asked to determine whether there is a surplus or shortage, if any, at that price.
Option a: 'Cannot be determined due to insufficient information.' This is a cautious and often correct stance when we lack essential data, since to determine surplus or shortage we need the quantities demanded and supplied at £125 (or the demand and supply schedules/curves or equilibrium price). Without those, the sign and size of any surplus or shortage cannot be established.
Option b: 'There is neither surplus not shortage because quantity demanded is equal to quantity supplied at the price level.' This statement asserts a market-clearing price at £125. However, it requires explicit evidence (Qd = Qs at £125). In the absence of any demand or supply data or a stated equilibrium condition at £125, we cannot assume this equality holds. Therefore this option is not justified.
Option c: 'There is a shortage of 120.' This would mean Qd exceeds Qs by 120 units at £125. Again, to claim a specific shortage amount, we would need the actual quantities demanded and supplied at that price. Without them, asserting a 120-unit shortage is unfounded.
Option d: 'There is a surplus of 120.' This would mean Qs exceeds Qd by 120 units at £125. Like the previous options, it requires concrete demand and supply quantities at £125 to substantiate. In the absence of data, this specific figure cannot be verified.
In summary, without the actual demand and supply information at the price of £125, we cannot determine whether a surplus or shortage exists, nor its magnitude. The safest mathematical stance is that the information provided is incomplete for making a determination, which aligns with option a, while the other options posit specific outcomes that are not supported by any given data.

252_EC201 Microeconomics

If the price is £125, what is the amount of surplus or shortage if there is any?

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