Suppose the supply and demand for milk is described by the following equations: Qd=600-100P,

Qs = -150+150P, where P is price in dollars . Qd is quantity demanded in millions of gallons per year.
A. Create supply and demand tables corresponding to these equations.
B. Graph supply and demand and determine equilibrium price and quantity.
C. Confirm your answer to (b) by solving the equations mathematically.
D. Would a govt. set price of $4 create a surplus or a shortage of milk? How much?
Is $4 a price ceiling or a price floor?

I think

A. To create the supply and demand tables, we need to substitute different values of P into the equations and calculate the corresponding values of Qd and Qs.

For Demand (Qd):
- Let's start with P = 0:
Qd = 600 - 100(0) = 600
- Now let's choose another value for P, say P = 2:
Qd = 600 - 100(2) = 400
- Continuing this process for different values of P, we get:

| P | Qd |
|---------|----------|
| 0 | 600 |
| 2 | 400 |
| 4 | 200 |
| 6 | 0 |
| 8 | -200 |

For Supply (Qs):
- Let's start with P = 0:
Qs = -150 + 150(0) = -150
- Now let's choose another value for P, say P = 2:
Qs = -150 + 150(2) = 150
- Continuing this process for different values of P, we get:

| P | Qs |
|---------|----------|
| 0 | -150 |
| 2 | 150 |
| 4 | 450 |
| 6 | 750 |
| 8 | 1050 |

B. Graphing the supply and demand curves, we plot the points from the tables above on a graph with P on the x-axis and Qd and Qs on the y-axis. The demand curve (Qd) will be downward sloping, while the supply curve (Qs) will be upward sloping.

The graph will show the points connecting the demand curve and the supply curve. The point at which these curves intersect will represent the equilibrium price and quantity.

C. To find the equilibrium price and quantity mathematically, we need to set Qd equal to Qs and solve for P:

Qd = Qs
600 - 100P = -150 + 150P

Adding 100P and 150 to both sides:
600 + 150 = 100P + 150P
750 = 250P

Dividing by 250:
P = 750 / 250
P = 3

So the equilibrium price is $3.

To find the equilibrium quantity, we substitute the equilibrium price into either the demand or supply equation:
Qd = 600 - 100P
Qd = 600 - 100(3)
Qd = 600 - 300
Qd = 300

So the equilibrium quantity is 300 million gallons per year.

D. To determine whether a government-set price of $4 creates a surplus or a shortage, we need to compare the quantity demanded (Qd) and the quantity supplied (Qs) at that price.

For P = $4:
Qd = 600 - 100(4) = 200
Qs = -150 + 150(4) = 450

Since Qd (200) is less than Qs (450), there will be a surplus of milk. The surplus will be the difference between Qs and Qd: 450 - 200 = 250 million gallons.

A price of $4 is considered a price ceiling, as it is below the equilibrium price of $3 and is set to prevent prices from rising too high.