In the NYC market for cab services the demand for cab rides is given by: = 120 20, where is the price per mile, and is the total length of cab rides over a month (in thousands of miles). The supply is given by = 30 30.

a. Graph the demand and supply by placing on the vertical axis (the y-axis) and on the horizontal axis (the x-axis). Indicate the choke price, the Q-intercept for demand, and the P-intercept of the supply curve.

b. What are the equilibrium price and quantity? Identify the equilibrium in the graph of part (a).

c. If the government sets a maximum price of P=2, would there be excess supply (surplus) or excess demand (shortage), or none (equilibrium)? How much is excess supply or demand, if any? [Hint: compare the demand at this price with the supply at this price]