Frisbee manufacturers persuade the government that Frisbee production improves scientists' understanding of aerodynamics and thus is important for national security. A concerned Congress votes to impose a price floor $2 above the equilibrium price. What is the new market price? How many Frisbees are sold?

Solution:

If the price floor is $2, then the new market rate is also SAME (that is $2). The reason behind this is because price floor is manadatory. A price floor is the lowest price which is set up by the legal enforcemnt agency and it is must that price floor must be above the equilibrium price.

At $2 price, number of Frisbees that are sold are only 2 million. The reason behind is becuase this is the quantity that is demanded.