Question

MIN DTAP on any Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. eso Quantity Supplied :ris

Answer 1

In a market, equilibrium point is a point where the demand and the supply curve intersect each other. At this point the quantity demanded is equal to the quantity supplied. The quantity at the equilibrium point is the equilibrium quantity and the price at the equilibrium point is the equilibrium price.

In the given graph, the equilibrium price is $25 and the equilibrium quantity is 450 million boxes.

At the price of $20, the quantity demanded is 540 millions of boxes and the quantity supplied is 180 million boxes. As the demand is greater than the quantity supplied, there is a pressure on the price to increase.

At the price of $30, the quantity demanded is 360 millions of boxes and the quantity supplied is 630 million boxes. As the demand is lesser than the quantity supplied, there is a pressure on the price to decrease.

It is true that a price ceiling above $25 per box is not a binding price ceiling in this market because $25 is the equilibrium price and any price ceiling above $25 will not bind the market.