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 Price (Dollars per box) Quantity Demanded (Millions of boxes) 600 Quantity Supplied (Millions of boxes) 368 PRICE (Dollars per box) +Demand 0 80 160 240 320 400 480 560 640 720 800 QUANTITY (Millions of boxes)

options for pressure on prices are upward or down ward

Answer 1

At equilibrium point, demand and supply curve intersects each other.

In this market, the equilibrium price is $25 per box, and the equilibrium quantitty of oranges is 400 million boxes.

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If quantity supply > quantity demand => there is surplus in market => downward pressure on price

If quantity supply < quantity demand => there is shortage in market => upward pressure on price.

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Price ($ per box)	Quantity demanded (million of boxes)	Quantity supplied (million of boxes)	Pressure on prices
35	0	480	downward
15	800	320	upward

Note: The quantity demanded and quantity supplied corresponding to price 35 and 15 might be differ from actual value. Please use "Graph Input Tool" to get the actual values.

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A price ceiling is said to be binding if it is set below the equilibrium price.

The equilibrium price is $25.

The price ceiling above $25 is not binding.

Answer: FALSE