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Price that represents an effective price ceiling

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.

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