Answer
a) equilibrium price is 8 dollars, equilibrium quantity is 6 million Frisbees
b) The new market price is 10 dollars, and 2 million Frisbees are sold.
c) The new market price is 8 dollars, and 6 million Frisbees are sold.
Work Step by Step
a) The equilibrium quantity is where quantity demanded is the same as quantity supplied. This happens at 6 million Frisbees, and the equilibrium price is the price where the equilibrium quantity is met (8 dollars).
b) The new price is increased by 2 dollars to 10 dollars. At the new price, 2 million Frisbees are demanded, and 10 million Frisbees are supplied. Thus, 2 million Frisbees are sold.
c) The price ceiling is 9 dollars (1 dollar less than the current market price). However, since the price ceiling is above the equilibrium price, the market will return to the equilibrium price of 8 dollars (and have 6 million Frisbees sold).
