Table 2: Market for monthly baskets of peaches in Santa...

Table 2: Market for monthly baskets of peaches in Santa Barbara Price Supply Demand 5 120 431 5.5 311 403 6 454 393 6.5 590 311 The peach trees are being overexploited in Santa Barbara, therefore the local government decides to pass a quota on the maximum quantity of peaches that can be traded at 311 baskets a month. Which of the following is true about the market for peaches after the quota: The new market price will be $5.5 It will have the same equilibrium price and quantity that the before the quota because the quota is not binding There is not enough information to get the new market price, but it will be lower The new market price will be $6.5

Transcript

00:01 Let's go over this question.

00:02 What is the equilibrium quantity for the data displayed? so the equilibrium is the point where the maximum price consumers are willing to pay is equal to the maximum price producers are willing to accept.

00:42 So both the consumer and producer are happy in this case.

00:48 So that is $10 as shown on the table.

00:53 Now at this point, we need to see how many consumers are willing to pay a higher price than the actual price of $10.

01:02 So let's look at the data.

01:14 So we see that brent, bart, bill, barb, and bob are both are all willing to pay more than the actual equilibrium price.

01:31 So we only look at those who are willing to pay more, not individuals who will pay the actual price or equilibrium price.

01:39 So now if we look at the supply side, we need to see how many suppliers are going to accept a price lower than $10.

01:53 So you see that there are five people who would do so.

02:00 So only chad is accepting it at the actual price.

02:06 So therefore, the quantity is going to be five bags because as stated in the question, it says that this is for the willingness to accept individual bags of oranges.

02:27 Each seller is only able to sell one bag and each buyer is only able to buy one bag.

02:32 So they're each going to buy one bag.

02:44 So that's why it's going to be five bags.

03:01 Assume that we are back to talking about bags of oranges, but the government has decided to that the tossed orange peels impose negative externality on the public...

Question

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