Using the following schedule, define the equilibrium price and quantity. Describe the situation at a price of $10. What will occur? Describe the situation at a price of $2. What will occur?
|
Price
|
Quantity demanded
|
Quantity supplied
|
|
$1
|
500
|
100
|
|
$2
|
400
|
120
|
|
$3
|
350
|
150
|
|
$4
|
320
|
200
|
|
$5
|
300
|
300
|
|
$6
|
275
|
410
|
|
$7
|
260
|
500
|
|
$8
|
230
|
650
|
|
$9
|
200
|
800
|
|
$10
|
150
|
975
|
1. Suppose the government imposed a minimum price of $7 in the schedule of question 1. What would occur? Illustrate.
2. In question 1, indicate what the price would have to be to represent an effective price ceiling. Point out the surplus or shortage that results. Illustrate a price floor and provide an example of a price floor.
3. Evaluate the following statement: "The demand for U.S. oranges has increased because the quality of U.S. oranges demanded in Japan has risen."