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12 March, 13:17

Frisbee manufacturers persuade the government that Frisbee production improves scientists' understanding of aerodynamics and thus is important for national security. A concerned Congress votes to impose a price floor $2 above the equilibrium price. What is the new market price? How many Frisbees are sold?

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  1. 12 March, 16:20
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    Solution:

    If the price floor is $2, then the new market rate is also SAME (that is $2). The reason behind this is because price floor is manadatory. A price floor is the lowest price which is set up by the legal enforcemnt agency and it is must that price floor must be above the equilibrium price.

    At $2 price, number of Frisbees that are sold are only 2 million. The reason behind is becuase this is the quantity that is demanded.
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