The following graph shows the annual market for Florida oranges, which are sold
ID: 2440199 • Letter: T
Question
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 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.
presurre on prices :Upward/ downward
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 shortage/surplus that is larger/smaller in the long run than in the short run.
2. Price controls in the Florida orange market 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 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 Graph Input Tool Market for Florida Oranges 50 Price (Dollars per box) 45 15 40 Quantit Demanded (Millions of boxes) 900Quantity Supplied (Millions of boxes) Supply 30 25 e20 Demand 15 Cr 0. 0 90 180 270 360 450 540 630 720 810 900 QUANTITY (Millions of boxes)Explanation / Answer
In this market, the equilibrium price is $25 per box where Demand equals supply and the equilibrium quantity of oranges is 450 million of boxes. (as shown in the question graph).
FALSE because a price ceiling above $25 per box is not a binding price ceiling. Binding price ceiling is when price is set below the equilibrium price.
Assuming that the long run demand for oranges is the same as the short run demand , we would expect a binding price ceiling to result in a shortage that is larger in the long run than in the short run. Because a binding price ceiling i.e price below the equilibrium price creates shortage , but the extent of this may differ between short and long run. In the short run , the supply curve is almost vertical because of this ,the amount of shortage is less in the short run. And in the long run , the supply curve is almost horizontal (or elastic) ,therefore, this implies large amount of shortage in the long run.
Price (Dollars per box) Quantity demanded (Millions of boxes) Quantity supplied (Millions of boxes) Pressure on prices 15 900 0 UPWARD Because there is shortage of 900 million boxes , this exerts upward pressure on price until there is no shortage or surplus. 35 0 900 DOWNWARD Because there is surplus of 900 million boxes, this exerts downward pressure on price until there is no shortage or surplus.Related Questions
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