Q^d= 9.5 - 2p Q^s= 0.6p Price Floor. Suppose that the government imposes a price floor equal to P F = 1.60. (a) Draw a diagram showing your market for donuts and indicate the price floor on this diagram. Is this price floor binding in your market for donuts? Carefully explain how you came to your answer. 1 (b) If this price floor is binding, how many donuts will be sold in this market following its imposition, and at what price? (c) If this is a binding price floor, does it lead to a shortage or a surplus of donuts? If so, calculate the amount of this
Q^d= 9.5 - 2p Q^s= 0.6p Price Floor. Suppose that the government imposes a price floor equal to P F = 1.60. (a) Draw a diagram showing your market for donuts and indicate the price floor on this diagram. Is this price floor binding in your market for donuts? Carefully explain how you came to your answer. 1 (b) If this price floor is binding, how many donuts will be sold in this market following its imposition, and at what price? (c) If this is a binding price floor, does it lead to a shortage or a surplus of donuts? If so, calculate the amount of this
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Q^d= 9.5 - 2p
Q^s= 0.6p
Price Floor .
Suppose that the government imposes a price floor equal to P F = 1.60. (a) Draw a diagram showing your market for donuts and indicate the price floor on this diagram. Is this price floor binding in your market for donuts? Carefully explain how you came to your answer. 1 (b) If this price floor is binding, how many donuts will be sold in this market following its imposition, and at what price? (c) If this is a binding price floor, does it lead to a shortage or a surplus of donuts? If so, calculate the amount of this shortage or surplus.
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