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Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

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BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

A recent study found that the demand-and-supply schedules for Frisbees are as follows:

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a. What are the equilibrium price and quantity of Frisbees?

b. Frisbee manufacturers persuade the government that Frisbee production improves scientists understanding of aerodynamics and thus is important for national security. A concerned Congress votes to impose a price floor $2 above the equilibrium price. What is the new market price? How many Frisbees are sold?

c Irate college students march on Washington and demand a reduction in the price of Frisbees. An even more concerned Congress votes to repeal the price floor and impose a price ceiling $1 below the former price floor. What is the new market price? How many Frisbees are sold?

Subpart (a):

To determine
The equilibrium price and quantity of Frisbees.

Explanation

The equilibrium price and quantity is determined at the interaction of the demand curve and the supply curve of the commodity in the market. When the demand and supply for the commodity is equal at a particular price point, the point will be the equilibrium price level and the equilibrium quantity in the economy. We have given the data on the different price points of Frisbees and the corresponding supply and demand quantities. The table is as follows:

Price per Frisbee Quantity Demanded Quantity Supplied
$11 1 billion Frisbees 15 billion Frisbees
...

Subpart (b):

To determine
The equilibrium price and quantity of Frisbees.

Subpart (c):

To determine
The equilibrium price and quantity of Frisbees.

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