Econ Supply Demand Help? Thanks Assuming that the long-run demand for oranges is

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Econ Supply Demand Help?

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Assuming that the long-run demand for oranges is the same as the short-run demand, you would expect a binding price ceiling to result in a (surplus/shortage)   that is (shorter/longer) in the long run than in the short run.

following graph shows the annual market for Florida oranges, which are sold in units of 90-pound boxes the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph e: 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 35 a 30 25 l Price 20 (Dollars per box) uantity Supplied (Millions of boxes) uantit 375 125 Supply Demanded Millions of boxes) Demand 15 10 0 50 100 150 200 250 300 350 400 450 500 QUANTITY (Millions of boxes) his market, the equilibrium price is $ per box, and the equilibrium quantity of oranges is million boxes

Explanation / Answer

The equilibrium price is $25 per box, and the equilibrium quantity of oranges is 250 million boxes.

Since a market price of $15 per box is less than the equilibrium price. At this price, the quantity demanded is 500 million boxes and quantity supplied is 0 boxes.

Hence there is an upward pressure to price to reach $25 per box.

Now, a  market price of $35 per box is more than the equilibrium price. The quantity demanded is 0 boxes and quantity supplied is 500 million boxes creating a downward pressure to price to reach $25 per box.

The statement is true that the price ceiling above $25 per box is not a binding price ceiling because market price is below this level.

Assuming that the long-run demand for oranges is the same as the short-run demand, a binding price ceiling will result in a shortage that is larger in the long run than in the short run. (As upward sloping supply is more price sensitive.)

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