1.Explain why many argue “market” prices will not necessary enable the economy to operate at its production frontierDraw the supply and demand curve based on the following demand and supply schedules. Show on the graph: market price and equilibrium price. PriceQuantity DemandedQuantity Supplied$101000$128020$146040$164060$182080$200100Utilizing the supply and demand curve you have drawn above, show what market condition will prevail if the government sets the price of $18 in the market? What will happen to the market condition (at the government price of $18) if the income is reduced significantly. .

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Answered: 1.Explain why many argue “market”…

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter4: Demand, Supply, And Markets

Section: Chapter Questions

Problem 6.12P

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1.Explain why many argue “market” prices will not necessary enable the economy to operate at its production frontier

Draw the supply and demand curve based on the following demand and supply schedules. Show on the graph: market price and equilibrium price.

Price	Quantity Demanded	Quantity Supplied
$10	100	0
$12	80	20
$14	60	40
$16	40	60
$18	20	80
$20	0	100

Utilizing the supply and demand curve you have drawn above, show what market condition will prevail if the government sets the price of $18 in the market?

What will happen to the market condition (at the government price of $18) if the income is reduced significantly.

Definition Video Definition Point where the demand and supply curves intersect. At the equilibrium price the quantity supplied of a good is equal to the quantity demanded. When the market is not in equilibrium, market surplus or market shortage occurs. The region that is above the price equilibrium indicates market surplus and the region below the price equilibrium indicates market shortage. Video

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