Answer to Question #191267 in Economics for Katelyn

Question

New York decides to reduce the consumption of sugary soda by imposing a minimum price of $2.50 per soda. The current equilibrium price is $1.50. Sketch the supply and demand for soda and show the effect of this policy. Clearly label the excess supply in your diagram. Explain the implications of this policy in few words also.

Answer 1

The demand in the figure is shown in red at a price of 2.50 and in green at a price of 1.50, the supply will not change, in the figure, it is shown in blue.