Question

Question 4 [12 points] The demand for oranges is represented by Pp = 101 - 2Q and the supply for oranges is represented by Ps = 5Q + 3. Determine for each of the following prices if it is a price floor, price ceiling, or neither. For each price determine the quantity shortage or surplus. a) P = $63. Price ceiling/floor: <select here> Surplus/Shortage: <select here> Amount: b) P = $53. Price ceiling/floor: <select here> Surplus/Shortage: <select here> Amount:

Answer 1

P = 101-20 Ps= SQ + 3 In Equilibrium Qd = Qs 101- 20 = SQ +3 101-3 =SQ +2Q 98 =12 Q = 98 7 a = 14 units. Substituting a into Po =101–2 (14) =l01-28 pt = 73 price equation (a) P=63 price. since P=63 is less than equilibrium price, so it is an example of price ceiling Price ceiling is set below equilibrium At p=63 63 = lol -zad 224 =101-63 ad - 38

ad = 19 unite. 63 a -52 +3 = 63-3 2= 12 units. shortage = Qd as = 19-12 - sunits. p=53 53 =101 - 220 220 = 101-53 Qd = 48

ad =au units. 53=SQ +3 a = 53-3 Q = lo units Surplus = 0 Shostage = QdQs = 24 to - ll units. since P-53 price $73, so Price ceiling. dies at is below equilibrium an example of T I ETOTEUTRITITUITARREPERTORIADOR