1.3. Suppose that the market for coats can be described as follows:

Quantity Demanded Quantity Supplied Price

$120

$100

$80

$60

(millions)

16 18 20 22

(millions)

20 18 16 14 V>

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w en 92 • PART 1 • Supply and Demand

a. What are the equilibrium price and quantity of coats?

b. Suppose the government sets a price ceiling of $80. Will there be a shortage, and if so, how large will it be?

c. Given that the government sets a price ceil ing of $80, how much will demanders be willing to pay per unit of the good (i.e., what is the true price)? Suppose that people line up to get this good and that they value their time at $10 an hour. For how long will people wait in line to obtain a coat?