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    Price that represents an effective price ceiling

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    Using the following schedule, define the equilibrium price and quantity. Describe the situation at a price of $10. What will occur? Describe the situation at a price of $2. What will occur?

    Price Quantity Demanded Quantity Supplied
    $1 500 100
    $2 400 120
    $3 350 150
    $4 320 200
    $5 300 300
    $6 275 410
    $7 260 500
    $8 230 650
    $9 200 800
    $10 150 975

    4.

    In exercise 3, indicate what the price would have to be to represent an effective price ceiling. Point out the surplus or shortage that results. Illustrate a price floor and provide an example of a price floor.

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    Solution Preview

    With effective price ceiling is one that matters, that does something. The clearing price is $5. If we make a price ceiling of $6, we might as well not do anything, because the market will contiue to clear at ...

    Solution Summary

    This solution finds equilibrium price and quantity.

    $2.19