Exhibit 4-10 Supply and demand data for apricots

Bushels demanded
per month

Price per
bushel

Bushels supplied
per month

50

$5

80

55

4

75

60

3

70

65

2

65

70

1

55

In Exhibit 4-10, assume that the government initially sets a price floor of $4 for apricots, and then removes the $4 price floor. What effect will this price change have?

Question

Exhibit 4-10 Supply and demand data for apricots

Bushels demanded per month	Price per bushel	Bushels supplied per month
50	$5	80
55	4	75
60	3	70
65	2	65
70	1	55

In Exhibit 4-10, assume that the government initially sets a price floor of $4 for apricots, and then removes the $4 price floor. What effect will this price change have?

Quizplus · Accepted Answer

Removing the price floor of $4 will allow the price to adjust to market equilibrium, where quantity supplied equals quantity demanded. At a price above equilibrium (such as $4), there is an excess supply. Removing the price floor allows the price to decrease, increasing quantity demanded and decreasing quantity supplied until equilibrium is reached, thus reducing the quantity of apricots supplied.

Exhibit 4-10 Supply and Demand Data for Apricots