What is the equilibrium price of apples

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The demand and supply of apples in City K has the following characteristics: each buyer will demand either zero or one apple, and each seller will supply either zero or one apple. The buyer will demand one apple if the market price is below or equal to the maximum price he is willing to pay (i.e., marginal benefit of apple), and the seller will supply one apple if the market price is above or equal to the minimum price that must be offered to him (i.e., marginal cost of apple). The number of buyers at each maximum price willing to pay and the number of sellers at each minimum price that must be offered are shown in the following tables:

Maximum price willing to pay

Number of buyers

Minimum price that must be offered

Number of sellers

$10

10 

$10

10

$9

15

$9

15

$8

10 

$8

10

$7

15

$7

10

$6

10 

$6

10

$5

10 

$5

15

$4

15 

$4

15

$3

10 

$3

20

(a) What is the equilibrium price of apples?

(b) What is the equilibrium quantity of apples?

(c) What is the magnitude of consumer surplus when the market is at equilibrium?

(d) What is the magnitude of producer surplus when the market is at equilibrium?

(e) Now suppose the government imposes a price ceiling of $7 to the market, what will be the magnitude of excess demand after the imposition of the price ceiling?

Reference no: EM133082886

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