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Ira Lisetskai [31]
2 years ago
8

The government of Paulaville decides to set prices of wheat. Calculate the amount of the shortage or surplus if the government s

ets a price floor at $2.
Business
1 answer:
ololo11 [35]2 years ago
7 0

Answer:

I have uploaded the picture with the relevant information below.

Explanation:

We can see in this picture that the market equilibrium is met at a price of $5, thus, $5 is the equilibrium price, because demand and supply are both 125 at this point.

If the govenment sets a price floor of $2, there will be no effect, because the price floor is non-binding.

A non-binding price floor is a minimum price set by the government that is actually lower that the equilibrium market price. In this case, the price of the market will be allowed to go to $5, and reach equilibrium, so the policy osf setting the $2 price floor will have no effect.

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