2. The table above gives the supply and demand schedules for scooterns. Quantity

Question

2. The table above gives the supply and demand schedules for scooterns. Quantity demanded Quantity supplied (scooters per week) (scooters Price scooter) 70 80 90 100 110 120 110 100 90 80 week) 60 80 100 120 140 a. If there are no price controls in the market, what are the equilibrium price and quantity in this market? Q= ecause of increased injuries sustained by children riding scooters, Citizens Against scooter Accidents successfully lobbies the government to impose a price floor of $80.00 im secgoters. What is the quantity demanded and supplied after the price floor has been imposed? Is there any shortage or surplus at this price floor? If so, how much? c. d. If the price floor is raised to S110.00, what is the quantity demanded and supplied? Qd = e. At a price floor of $110.00, is there any shortage or surplus? If so, how much? Qs

Explanation / Answer

Answer
a)
the demand is in equilibrium at quantity demanded=quantity supplied
Q=100
P=$90
b)
the price floor is the minimum price charged, it should be above equilibrium to be effective but it is lower than the equilibrium price so the market will clear at $90 itself because price floor is minimum price so the producer can charge higher than that.
Qd=100, Qs=100, and P=$90
c)
here is no shortage or surplus because of the market clear at equilibrium.

d)
The price floor is effective so
Qd=80 nits and Qs=140

e)
There is surplus because Qs>Qd
the surplus is =140-80=60 units

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