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Question on hypothetical economy

Consider that aggregate demand and the short run supply for any hypothetical economy are as :

 

1456_Hypothetical economy.png

Why will a price level of 150 not be an equilibrium price level in this economy? Why not 250?

E

Expert

Verified

At price level of 150, real GDP supplied maximum is $200 billion, less than the real GDP demanded of $400 billion. The shortage of real output will drive the price level up. At price level of 250, real GDP supplied is $400 billion that is more than the real GDP demanded of $200 billion. The surplus of real output will drive down the price level. Equilibrium takes place at the price level at which AS & AD intersect.

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