Microeconomics
Microeconomics
11th Edition
ISBN: 9781260507140
Author: David C. Colander
Publisher: McGraw Hill Education
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Chapter 5, Problem 10QE
To determine

Impact of an effective price floor.

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What is the difference between a price ceiling and a price floor? Compared to the competitive equilibrium price, where must price ceilings and price floors be set to have an impact on the market.
Suppose government regulates the price of beef and sets it below the market clearing price. Explain the outcome of the initiative by using the concept of floor price
Market research has revealed the following information about the market for washing machines: The demand schedule can be represented by the equation QD = 1,600 – 300P, where QD is the quantity demanded and P is the price. The supply schedule can be represented by the equation QS = 1,400 + 700P, where QS is the quantity supplied. Calculate the equilibrium price and quantity in the market for washing machines. Identify the flaw in this analysis: “If more Bahamians go on a low-carb diet, the demand for pasta will fall. The decrease in the demand for pasta will cause the price of pasta to fall. The lower price, however, will then increase the demand. In the new equilibrium, Bahamians might end up consuming more pasta than they did initially.”
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