Turning closer to home now, the table shows the weekly demand and supply informa

Question

Turning closer to home now, the table shows the weekly demand and supply information for soup in
Ithaca. The quantity actually traded in the Ithaca market will be 135 cups of soup/week if

Turning closer to home now, the table shows the weekly demand and supply information for soup in Ithaca. The quantity actually traded in the Ithaca market will be 135 cups of soup/week if Price the local government enforces a price ceiling of $1.75/cup. the local government allows the market to reach its natural equilibrium. the local government enforces a price floor of $0.75/cup. the local government enforces a price floor of $1.75 cup. None of the above is correct.

Explanation / Answer

Correct option (E).

Equilibrium price is $1.25 & output is 310 where demand = supply.

If actual output sold is 135, it happens at price of $0.75.

Since suppliers will not be willing to sell at this lower price, government has to impose a price ceiling at $0.75.

None of the options mention this.

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