In Figure 9, above, a price ceiling set at $1.00 results in: a shortage of 10 un
ID: 1250666 • Letter: I
Question
In Figure 9, above, a price ceiling set at $1.00 results in: a shortage of 10 units. a shortage of 20 units. a surplus of 10 units. a surplus of 20 units. no change to equilibrium. In Figure 9, above, a price door set at $1.00 results in: a shortage of 10 units. a shortage of 20 units. a surplus of 10 units. a surplus of 20 units. no change to equilibrium. In Figure 9, above, a price ceiling set at $2.50 results in: a shortage of 5 units. a shortage of 10 units. a surplus of 5 units. a surplus of 10 units. no change to equilibrium. Figure 10, above, shows the milk market. Suppose the government enacts a price ceiling of $1 per litre and it agrees to pay a subsidy to daily fanners just sufficient to induce them to produce the quantity of milk chosen by households at this price. The cost to government of this subsidy program will be: $4 million. $9 million. $13 million. $17 million. $26 million. A decrease in the price of X from $6 to $4 causes an increase in the quantity of Y demanded (at the current price of Y) from 900 to 1,100 units. What is the cross elasticity of demand between X and Y?: 0.5. -0.5. 2 -2. a) or c) depending on whether X and Y are substitutes or complements.Explanation / Answer
36.if price ceiling is set at 1.00, notice that the quantity demended for that price is 30 units and quantity supplied is 10. Therefore, demand exceed supply by 20 units. answer is B. 37. a price floor is a price madate set by, say a govt. policy on certain goods/items. In this case since the market price is already above 1.00 ( at 2.00), the mandate has no effect. answer is e. 38. if the price ceiling is set above the market price, say at 2.50, the market price will prevail over this non binding price ceiling. therefore, it has no effect on the equilibrium. answer is e. 39. With a subsidy of 1 dollar per litre, consumers will demand 26 litres(million). This will induce the suppliers to produce at this quantiry demanded. without the subsidy, the market price at this quantity would have benn 1.50. The difference ( 1.50-100) is the govr subsidy to the producers. The total amount of subsidy, therefore, is .50 multiply by the amount supplied= .5 X 26= 13. Answer is C. 40. cross elasticty of demand E x,y between two products, X, and Y, is the percentage change in demand for Quantity X divided by the percentage change in price of product Y. Since the question tells us that price of X changes from 6 to 4 and quantity of Y changes from 900 to 1100, we are calculating for the cross elasticity of demand E y,x= [(1100-900)/900] / [(4-6)/4)]= -.22/ .4= -.05 ( it's minus because the slope is negative, when price falls, demand incrases). answer b. ( Extra note: X and Y are compliments. Since price of X falls, quantity of Y demanded increases. You can think of these as cars and gas prices. I hope this helps.)
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