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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.

(graph in photo)

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
(Dollars per box)	(Millions of boxes)	(Millions of boxes)
35
15

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

a. True

b. 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 (a. shortage, b. surplus) that is (a. larger, b. smaller) in the long run than in the short run.

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.
PRICE (Dollars per box)
50
45
40
35
30
25
20
15
10
5
0
0
Supply
Demand
90 180 270 360 450 540 630 720 810 900
QUANTITY (Millions of boxes)
Graph Input Tool
Market for Florida Oranges
Price
(Dollars per box)
Quantity
Demanded
(Millions of boxes)
15
900
Quantity Supplied
(Millions of boxes)
(?)
0

Definition Video Definition Point where the demand and supply curves intersect. At the equilibrium price the quantity supplied of a good is equal to the quantity demanded. When the market is not in equilibrium, market surplus or market shortage occurs. The region that is above the price equilibrium indicates market surplus and the region below the price equilibrium indicates market shortage. Video

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