The table below illustrates the market's demand and supply for cheddar cheese. a. Find the equilibrium price and quantity. b. If the government wished to make cheddar cheese more affordable, which would be a more appropriate policy choice: a price ceiling or a price floor? Explain your answer. c. If a price ceiling was set at $3.20, what would the quantities demanded and supplied be? Would a shortage or surplus exist? If so, how large would the shortage or surplus be?
The table below illustrates the market's
a. Find the
b. If the government wished to make cheddar cheese more affordable, which would be a more appropriate policy choice: a
c. If a price ceiling was set at $3.20, what would the quantities demanded and supplied be? Would a shortage or surplus exist? If so, how large would the shortage or surplus be?
d. If the price ceiling were raised to $3.80, would a shortage or surplus exist? If so, how large would the shortage or surplus be? (Be careful with this one. Remember that this is a price ceiling intended to make cheese affordable.)
e. The price of milk, a key input for cheese production, rises, so that the supply decreases by 80 pounds at every price. Find the new equilibrium price and quantity. (Hint: the demand schedule will remain same, but the supply schedule will be different.)
f. A new study says that eating cheese is good for your health, so that demand increases by 20% at every price. Find the new equilibrium price and quantity based on the table below (ignore the changes you made in e; hint: The supply schedule will remain the same, but the demand schedule will change).
|
Price per Pound |
Qd |
Qs |
|
$3.00 |
750 |
540 |
|
$3.20 |
700 |
600 |
|
$3.40 |
650 |
650 |
|
$3.60 |
620 |
700 |
|
$3.80 |
600 |
720 |
|
$4.00 |
590 |
730 |
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