Explain why the government might impose a floor

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Reference no: EM1351848

Suppose the market for oranges is disturbed by below-freezing cold weather that destroys much of the orange crop in the California. Predict what will happen to the equilibrium price and quantity in the market for oranges because of this natural disaster. In the market for oranges use $18 per bushel for the original equilibrium price and 9 billion bushels for the original equilibrium quantity. The new equilibrium price and quantity you can make up.

Suppose the federal government decided to place a price floor on oranges that was above the equilibrium price of $18 per bushel. Explain what will happen to demand and supply as a result of the price floor. Support your answer with a graph and explain any changes to demand and supply caused by the price floor. Again, use $18 and 9 billion bushels for the original equilibrium price and quantity. At the beginning of your answer be sure to explain what a price floor is, explain why the government might impose a floor, and who it is intended to benefit.

Reference no: EM1351848

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