1.Use the original supply and demand schedules from question one (before the new bakery arrives in town) to answer the following questions about the market for bread.

a)Suppose that a price floor of $8 per loaf of bread is imposed. Draw a diagram to illustrate the effect that this policy will have on the market for bread. Explain what happens to this market with this price floor.

b)Suppose that a price ceiling of $8 per loaf is imposed. Explain what effect this policy will have on this market.

c)Suppose that instead of imposing a price ceiling or a price floor, the government sets a limit of 225 on the number of loaves of bread that can be sold in this market. Illustrate the effect of this policy with a diagram. What will the price of a loaf of bread be with this restriction? How many loaves of bread will be sold?

1. The supply and demand schedules below are from the market for bread in a small town. Price per Quantity of Quantity of loaf Loaves Supplied Loaves Demanded $2 10 525 $3 120 445 $4 225 375 $5 315 315 $6 390 265 $7 450 225 $8 495 195 $9 525 175 $10 540 165 a) Using this information, draw the demand curve and the supply curve for bread in this town. price Market for bread 12 + Demand curve Supply curve + 8t 106 200 300 400 500 Quantity