Answered: The following graph shows the annual…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

The following graph shows the annual market for Florida oranges, which are sold in units of 90-pound boxes.

Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph.

Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly.

07014021028035042049056063070050454035302520151050PRICE (Dollars per box)QUANTITY (Millions of boxes)Demand Supply

Graph Input Tool

Market for Florida Oranges
	Price (Dollars per box)
	Quantity Demanded (Millions of boxes)			Quantity Supplied (Millions of boxes)

In this market, the equilibrium price is

per box, and the equilibrium quantity of oranges is

million boxes.

For each of the prices listed in the following table, determine the quantity of oranges demanded, the quantity of oranges supplied, and the direction of pressure exerted on prices in the absence of any price controls.

Price	Quantity Demanded	Quantity Supplied	Pressure on Prices
(Dollars per box)	(Millions of boxes)	(Millions of boxes)
35			up/down
15			up/down

True or False: A price ceiling above $25 per box is a binding price ceiling in this market.

True

False

Because it takes many years before newly planted orange trees bear fruit, the supply curve in the short run is almost vertical. In the long run, farmers can decide whether to plant oranges on their land, to plant something else, or to sell their land altogether. Therefore, the long-run supply of oranges is much more price sensitive than the short-run supply of oranges.

Assuming that the long-run demand for oranges is the same as the short-run demand, you would expect a binding price ceiling to result in a __shortage/surplus?__ that is __larger/smaller?__ in the long run than in the short run.

Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly.
Graph Input Tool
Market for Florida Oranges
50
45
I Price
(Dollars per box)
Supply
15
40
Quantity
anded
Quantity Supplied
(Millions of boxes)
700
210
35
(Millions of boxes)
30
25
20
Demand
15
10
70
140 210 280 350 420 490 560 630 700
QUANTITY (Millions of boxes)
In this market, the equilibrium price is $
per box, and the equilibrium quantity of oranges is
million boxes.
PRICE (Dollars per box)

Definition Video Formula Definition Phenomenon in which market supply and demand balance each other. Market equilibrium is the economic state in which the market demand curve intersects the market supply curve, giving us the equilibrium price and equilibrium quantity for which a commodity can be sold and purchased in an economy. When market equilibrium is achieved, it suggests that all resources have been allocated efficiently and that there is just a distribution of income and resources in the economy. Video Formula

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