Effect of price flooring and price ceiling on demand

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Reference no: EM1312702

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."

Reference no: EM1312702

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