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Ch. 6 Problems and Applications

Ch. 6 Problems and Applications. 1. Congress imposes P Ceiling $40. More or less people attend classical music concerts? . $40. Qe. 2. Cheese P is too low a. Binding P floor – show the effect……shortage or surplus. 2b. Farmers complain of lower total revenue. Possible? Explain. Yes

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Ch. 6 Problems and Applications

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  1. Ch. 6 Problems and Applications 1. Congress imposes P Ceiling $40. More or less people attend classical music concerts? $40 Qe

  2. 2. Cheese P is too low a. Binding P floor – show the effect……shortage or surplus

  3. 2b. Farmers complain of lower total revenue. Possible? Explain • Yes • P increase • Qd decrease • D = Elastic

  4. 2c Gov. purchases surplus at the P floor. Who benefits, who loses • Farmers benefit, sell more at higher price • Govt. loses – spending money on cheese they don’t need • Tax payers lose – cheese they don’t need nor want

  5. 3. Frisbees • A. Equilibrium? • Pe 8$ Qe 6 • B. Frisbee co.’s ask for and receive P floor $2 above Pe. New market P and Q sold? • $10, 2 sold but 12 supplied = surplus 10 • C. Students complain and Congress agrees and places P ceiling $1 below former P floor. New market P and Q sold? • $9 …..but….. • Non binding b/c above Pe $8 so Q sold = 6

  6. 10 9 8 2 12

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