Answered: Below is a graph of the market for…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Below is a graph of the market for apples annually. Assume the government has imposed a price floor of $10 per crate. Use the graph and assumption to answer questions 1a – 1c.

What are the original market equilibrium price and quantity for apples before the price floor is imposed?

How many crates of apples will be sold after the price floor has been imposed?

Will there be a shortage or a surplus? If there is a shortage or a surplus, how large will it be?

Will apple producers benefit from the price floor? Explain.

$10
28 30
34
Demand
Quantity
of
rates per year

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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Here, the given graph shows the market for apples where government has imposed the price floor of $10.

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Will consumers benefit with the price floor?

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