Plot the following demand and supply schedules on the accompanying graph, and answer questions a through e.

a. What is the equilibrium price and equilibrium quantity?

b. How much of a shortage or surplus would occur at $2.50?

c. How much of a shortage or surplus would occur at $7.50?

d. What would happen if the government established a price floor of $8.75 on this item?

e. What would happen if the government established a price ceiling of $8.75 on this item?

Transcribed Image Text:

Price per Item $1.25 2.50 3.75 5.00 6.25 7.50 8.75 10.00 Price $11.25 10.00 8.75 7.50 6.25 5.00 3.75 2.50 1.25 O 20 Quantity Demanded 150 140 125 105 80 50 10 0 Quantity Quantity Supplied 0 50 80 90 100 110