Refer to the above diagram. A price of $20 in this market will result in:

EC25

Question

Refer to the above diagram. A price of $20 in this market will result in:

EC25

BlackTom AI · Accepted Answer

Restating the scenario: The question asks what happens at a price of $20 in the shown market diagram.

Option context: The provided answer suggests there is a shortage of 100 units when the price is $20. Since there are no listed alternative choices in the prompt, I will explain why a shortage occurs at this price and estimate the magnitude using the graph.

Step-by-step analysis:
- First, identify the market-clearing (equilibrium) price and quantity from the diagram. The intersection of the demand and supply curves appears around a price of $40 and a quantity of about 150 units. This is the equilibrium point where Qd = Qs.
- Next, consider what happens when the price is set at $20, which is below the equilibrium price. At prices below equilibrium, consumers demand more than what producers are willing to supply, creating a shortage.
- To estimate the size of the shortage at $20, read the quantities from the graph:
  - Quantity demanded at price $20: From the demand curve, the quantity demanded is higher than 150 units, roughly around 180 units (the exact value depends on the scale but it is clearly the larger quantity shown at that price level).
  - Quantity supplied at price $20: From the supply curve, the quantity supplied is lower than 150 units, roughly around 80 units (the exact value depends on the scale but it is clearly the smaller quantity shown at that price level).
- The shortage magnitude is the difference between quantity demanded and quantity supplied: about 180 − 80 ≈ 100 units.

Why this matches the given answer: Since price $20 is below equilibrium, the market cannot supply enough to meet the higher demand, producing a shortage. The approximate gap of 100 units aligns with the visualization on the graph where the demand quantity at $20 markedly exceeds the corresponding supply quantity.

Why other interpretations would be wrong: If one assumed the price at $20 equates supply with demand, that would imply the price is at equilibrium, which contradicts the drawn intersection around $40. If one claimed there is a surplus at $20, that would require quantity supplied to exceed quantity demanded, which is not the case at a price below equilibrium. Finally, presenting any other numeric gap would misread the graph; the closest and intended magnitude shown by the graph is a 100-unit shortfall.

20250616A Unit 1 Homework

Refer to the above diagram. A price of $20 in this market will result in: EC25

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