Answer to Question #221181 in Economics for Sukh

Question

Assume Diagram 1 below represents a competitive market. 

 

Diagram 1

 

a. What is the overall market situation at a price of $5? 

b. What changes in supply and/or demand would cause the equilibrium market price to fall to $2 (list all possibilities)?

c. If the government imposed a price ceiling of $3 per unit, how does this change the market situation?

d. Suppose the product represented in the graph is a gallon of regular milk. If this were soy milk instead, how do you think the demand curve in this case would change? Explain.

Answer 1

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