Question

The following graph shows the annual market for Florida oranges, which are sold in units of 99-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.

 In this market, the equmbrlum price is _______  per box, and the equilibrium quantity of oranges is _______  million boxes.

 For each of the prices listed in the following table, determine the quantity of oranges demanded, the quantity of oranges supplied, and the direction of

 pressure exerted on prices in the absence of any price controls.

 True or False: A price ceilling above $25 per box in a binding price ceiling in this market.

•  True

•  False

 Because it takes many years before newly planted orange trees bear fruit, the supply curve in the short run is aimost vertical, In the long run, farmers can decide whether to plant oranges on their land, to plant something eise, or to sell their land altogether. Therefore, the long-run supply of oranges is much more price sensitive than the short-run supply of oranges.

 Assuming that the long-run demand for oranges is the same as the short-run demand, you would expect a binding price ceiling to resuit in a _______  that is _______  in the long run than in the short run.

Answer 1

Ans. Equilibrium price = $25

Equlibrium Quanitity = 450 million boxes

Equilibrium is where demand and supply curve interesects each other such that quantity demanded becomes equal to quantity supplied.

At price $15,

Quantity Demanded = 900

Quanitity Supplied = 0

Pressure on price = To rise, because huge demand and supply is zero. Situation of excess demand. Buyers will push up the prices and price starts rising.

At price = $35

Quanntity Demanded = 0

Quantity supplied = 900

Pressure on Price = Price starts falling because there will be excess supply. The buyers will pull down the prices. The demand will be 0 at p = $35 because this is too high price for buyers. So, sellers will decrease the price in order to sell their products.

A price ceiling above price $25 will be binding in this case - FALSE because price ceiling is a price maximum, it means no one can charge more than the maximum price. In this case, if price ceiling is above $25 which is equilibrium price, then the price automatically comes down to $25.

However, if price ceiling is set below the equilibrium price then it will be binding and creates a problem of excess demand.

Please provide the options in the last two blanks.