Answered: Use the accompanying graph to answer…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose demand is D and supply is S⁰. If a price ceiling of $6 is imposed, what are the resulting shortage and full economic price?

Shortage:

Full economic price:

Use the accompanying graph to answer these questions.
s'
20
18 -
16 -
14 -
12 -
10 -
8-
6-
4 -
D
2
2
4
Price of X ($)

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Follow-up Question

Suppose demand is D and supply is S⁰. If a price floor of $12 is imposed, what is the resulting surplus? What is the cost to the government of purchasing any and all unsold units?

Surplus:

Cost to government

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