A Tabassum Hand Out- Ch. 6 ECON 1000
Hand-Out Ch. 6- (Supply, Demand and Govt. Policies)
Question 1: A recent study found that the demand and supply for Frisbees are as follows:
P QD QS
a. What are equilibrium P and Q? $ Millions Millions
11 1 15
10 2 12
9 4 9
8 6 6
7 8 3
6 10 1
b. Frisbee manufacturers persuade the government that Frisbee production improves scientist’s
understanding of aerodynamics and thus is important for national security. A concerned Parliament
votes to impose a price floor of $2 above the market price. What is the new market price? How many
Frisbees are sold?
c. Irate students march in Ottawa and demand a reduction in the price of Frisbees. An even more
concerned Parliament votes to repeal the price floor and impose a ceiling $1 below the former price
floor. What is the market price? How many Frisbees are sold?
Question 2: The Canadian Government administers two programs that affect the market for cigarettes.
Health Canada media campaigns and labeling requirements are aimed at making the public aware of
the dangers of cigarette smoking. At the same time Agriculture and Agri-Food Canada imposes
production quotas on tobacco farmers, which raises the price of tobacco above the equilibrium price.
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Hand-Out Ch. 6- (Supply, Demand and Govt. Policies)
Question 1: A recent study found that the demand and supply for Frisbees are as follows:
P QD QS
a. What are equilibrium P and Q? $ Millions Millions
11 1 15
10 2 12
9 4 9
8 6 6
7 8 3
6 10 1
b. Frisbee manufacturers persuade the government that Frisbee production improves scientist’s
understanding of aerodynamics and thus is important for national security. A concerned Parliament
votes to impose a price floor of $2 above the market price. What is the new market price? How many
Frisbees are sold?
c. Irate students march in Ottawa and demand a reduction in the price of Frisbees. An even more
concerned Parliament votes to repeal the price floor and impose a ceiling $1 below the former price
floor. What is the market price? How many Frisbees are sold?
Question 2: The Canadian Government administers two programs that affect the market for cigarettes.
Health Canada media campaigns and labeling requirements are aimed at making the public aware of
the dangers of cigarette smoking. At the same time Agriculture and Agri-Food Canada imposes
production quotas on tobacco farmers, which raises the price of tobacco above the equilibrium price.
1 of 3
