Using the same eggs demand function, what is the price when Qd equals 0?

Using the same eggs demand function, what is the price when Qd equals 0?

• A. $25
• B. $50
• C. $0
• D. $100

Answer: (B)

The key idea is the choke price—the price at which quantity demanded falls to zero. To find it, set Qd to zero in the demand equation and solve for price. For a linear form Qd = a − bP, 0 = a − bP implies P = a/b. The numbers in this problem give a/b = 50, so the price where quantity demanded becomes zero is $50. At prices below $50 you’d still buy eggs (positive Qd); at $50 you’re at the tipping point where demand hits zero; higher prices would produce zero or negative demand in the model, so the correct price is $50.

The key idea is the choke price—the price at which quantity demanded falls to zero. To find it, set Qd to zero in the demand equation and solve for price. For a linear form Qd = a − bP, 0 = a − bP implies P = a/b. The numbers in this problem give a/b = 50, so the price where quantity demanded becomes zero is $50. At prices below $50 you’d still buy eggs (positive Qd); at $50 you’re at the tipping point where demand hits zero; higher prices would produce zero or negative demand in the model, so the correct price is $50.