Aplia Homework: Demand, Supply. and Markets 12. Disequlibrium- Price cellings Th

Question

Aplia Homework: Demand, Supply. and Markets 12. Disequlibrium- Price cellings 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 foltowing 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. Graph Input Tool 50 Market for Florida Oranges 900 Quantity Supplied s of boxes) 378 of boxes) a 30 25 QUANTITY (Milions of boxes)

Explanation / Answer

30

Downwards (as SS<DD)

You can get more exact values of DD and SS by putting price equal to 30 and 20 in the graph input tool.

FALSE, the price ceiling below $25 is binding because $25 is the equilibrium price. If the prices hit the price ceiling first then they are binding. As after that equilibrium will not be reached.

Assuming that the long run demand curve is same as short run demand, you would expect the binding price ceiling to result in a SHORTAGE that is (fall in prices/Supply curve is flatter) in the long run than in the short run

Price Quantity demanded Quantity supplied pressure on prices

30

540 180

Downwards (as SS<DD)

20 405 630 Upwards (as SS>DD)

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