Homework: Prices: Free, Controlled, And Relative (Ch 04)

How prices allocate resources

Suppose that there are three beachfront parcels of land available for sale in Asilomar, and six people who would each like to purchase one parcel. Assume that the parcels are essentially identical and that the minimum selling price of each is $445,000. The following table states each person's willingness and ability to purchase a parcel.

   

 

Willingness and Ability to Purchase

 

 

(Dollars)

 

Hubert

 

600,000

 

Kate

 

510,000

 

Manuel

 

470,000

 

Poornima

 

420,000

 

Shen

 

390,000

 

Valerie

 

380,000

Which of these people will buy one of the three beachfront parcels? Check all that apply.

   

 

Hubert

   

 

   

 

   

 

   

 

   

 

Assume that the three beachfront parcels are sold to the people that you indicated in the previous section. Suppose that a few days after the last of those beachfront parcels is sold, another essentially identical beachfront parcel becomes available for sale at a minimum price of $432,500. This fourth parcel be sold because will purchase it from the seller for at least the minimum price.

(2)Price controls in the Florida orange market

The following graph shows the annual market for Florida oranges, which are sold in units of 90-pound boxes.

Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph.

Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly.

Created with Raphaël 2.1.2

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PRICE (Dollars per box)

QUANTITY (Millions of boxes)

Demand 

Supply 

Graph Input Tool

   

Market for Florida Oranges

 

 

 

 

 

 

15

 

 

 

 

 

900

 

 

378

 

   

Price

(Dollars per box)

   

Quantity Demanded

(Millions of boxes)

   

Quantity Supplied

(Millions of boxes)

In this market, the equilibrium price is$per box, and the equilibrium quantity of oranges ismillion boxes.

For each price listed in the following table, determine the quantity of oranges demanded, the quantity of oranges supplied, and the direction of pressure exerted on prices in the absence of any price controls.