Week 5 homework XXXXXXXXXXECO 105 XXXXXXXXXXDue date: 4/30/2021 1) In the following market, for each policy below state whether it is binding or not and how much will be the possible excess supply or...

Answer to Question 1
Price floor is the amount as set by the government below which the price in the market cannot fall. The price can be above the level of price floor but it cannot go below.
Price ceiling is the opposite of price floor. The price of the commodity cannot rise beyond this level. Can be below this level but cannot cross this.
In the given diagram the equilibrium price is $10 and equilibrium quantity is 10. This means start at this level the demand and supply will be same.
(a) Price floor of $6: At the price level of $6, the quantity demanded is 16 but the supply quantity is less. This excess demand will force the price to increase which eventually will lead to the fall in demand and increase in...