In: Economics
3. Problems and Applications Q3
A recent study found that the demand and supply schedules for flying disks are as follows:
Price |
Quantity Demanded |
Quantity Supplied |
(Dollars per disk) |
(Millions of disks) |
(Millions of disks) |
11 |
1 |
15 |
10 |
2 |
12 |
9 |
4 |
9 |
8 |
6 |
6 |
7 |
8 |
3 |
6 |
10 |
1 |
Complete the first row of the following table by indicating the equilibrium price and the equilibrium quantity of flying disks in the absence of any price controls.
Scenario |
Market Price |
Market Quantity |
Binding or Not Binding |
(Dollars per disk) |
(Millions of disks) |
||
No Price Control |
N/A |
||
Price Floor |
|
||
Price Ceiling |
|
Flying disk manufacturers persuade the government that flying disk production improves scientists' understanding of aerodynamics and thus is important for national security. A concerned Congress votes to impose a price floor $1 above the equilibrium price.
Complete the second row of the previous table by indicating the new price and quantity of flying disks when Congress imposes a price floor $1 above the equilibrium price. Then indicate whether the price floor is binding or not binding.
Irate college students march on Washington and demand a reduction in the price of flying disks. An even more concerned Congress votes to repeal the price floor and impose a price ceiling $2 below the former price floor.
Complete the final row of the previous table by indicating the new price and quantity of flying disks when Congress imposes a price ceiling $2 below the former price floor. Then indicate whether the price ceiling is binding or not binding.