2 Price eontrols in the Florida orange market The following graph shows the annu

Question

2 Price eontrols in the Florida orange market The following graph shows the annual market for Florida oranges, which are sold in units of 90- pound boxes Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: 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 In this market, the equilibrium price isper box, and the equilibrium quantity of oranges is million boxes. For each of the prices listed in the following table, determine the quantity of oranges demanded, the quantity of oranges supplied, and the direction of pressure exerted on prices in the absence of any price controls. Pressure on Prices True or False: A price ceiling below $25 per box is a binding price ceiling in this market. Because it takes many years before newly planted orange trees bear fruit, the supply curve in the short run is almost vertical. In the long run, farmers can decide whether to plant oranges on their land, to plant something else, or to sell their land altogether. Therefore, the long-run supply of oranges is much more price sensitive than the short-run supply of oranges. 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 athat isin the long run than in the short run.

Explanation / Answer

The market is in equilibrium at the point where supply and demand curves intersect.It is the point wherequantity demanded and quantity supplied are equal and the correspondingprice is the equilibrium price.

1) Equilibrium price = $25 per box

     Equilibrium quantity = 400 millions of boxes

2) Table showing the quantity demanded and quantity supplied at each price

Price                          Quantity demanded                  Quantity supplied                     Pressure on prices

$20                                     480                                                175                                     Demand side

  $30                                     320                                                640                                      supply side  

3) True

A binding price ceiling is a price control which is set below the equilibrium price.It is the maximum price that can be charged.Since equilibrium price is $25 price set below it is a binding price ceiling.

4) Decrease in supply in the long run than in the short run.

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