Question

Answer A- H please

a) Draw a Supply Curve and the Demand Curve for the Sugar

Label the supply S1 and the demand D1. Label on the vertical axis P for the equilibrium price and label the horizontal axis Q for the equilibrium quantity.

We currently have the sugar market in equilibrium at a price of $3 per pound and 100,000 pounds.

Now assume that the state government just announced a new price floor program for the sale of sugar.

Under this program, a price floor for sugar will be set at 20% above the current market equilibrium price of sugar.

We also know that the Es of sugar is 1.20 and that the Ed for sugar is 0.80.  

Now, given this information, answer the following questions.

b) State the dollar amount of the price floor and label on your graph PF for Price Floor.

c) Using the Definition Formula for Elasticity of Supply or Es (found in the lectures for Chapter 6) determine the number for the new Quantity Supplied after the price floor is imposed. Please show how you got your answer.

d) Label the new Quantity Supplied on your graph as Qs along the horizontal axis.

e) Using the Definition Formula for Elasticity of Demand or Ed (found in the lectures for Chapter 5) determine the number for the new Quantity Demanded after the price floor is imposed. Please show how you got your answer.

f) Label the new Quantity Demanded on your graph as Qd along the horizontal axis.

g) Please determine the market situation we now have after the price floor was imposed. Use numbers in your answer.

h) Explain now what will happen in this market starting from the situation you stated in (g) above.

Answer 1