Question

2. Price controls in the Florida orange market The following graph shows the annual market for Florida oranges, which are sold in units of 90-pound boxes. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Graph Input Tool Market for Florida Oranges 50 45 40 Price (Dollars per box) 15 antity antity Supplied Millions of boxes) eimandef boe)900tli 378 30 25 20 15 10 0 90 180 270 300 450 540 e30 720 810 900 QUANTITY (Millions of boxes)

Answer 1

In the market, the equilibrium price rate is the one at which quantity demanded equals quantity supplied. This implies the equilibrium price is S25 and equilibrium quantity is 450 million boxes. At S30, the quantity demanded is 225 million boxes and quantity supplied is 486 million boxes. Hence there is a downward pressure on the price. At S20, the quantity demanded is 675 million boxes and quantity supplied is 414 million boxes. Hence there is an upward pressure on the price rate. Henceitis ahe becamseaceilng price bedow S2s is binding becaus the market price s s2s