Assume that the government imposes a price floor of $12 in the E-Book market. Explain what would happen in this market.

The use of E-Books has increased in recent years, especially with the advent of mobile E-Readers.  A marketing research firm recently developed the following supply and demand schedules for E-books:

Price/E-Book Quantity Demanded Quantity Supplied
$18 4000 10,000
16 5000 9500
14 6000 9000
12 7000 8500
10 8000 8000
9 9000 7500
8 10000 7000
7 11000 6500
6 12000 6000
5 13000 5500
4 14000 5000
2 15000 4500

Assignment Guidelines:

Using Microsoft (MS) Excel, construct a graph showing supply and demand in the E-Book market based on the data above. (Save this file because you will re-work it later in the assignment.) When finished, copy and paste or import your graph into an MS Word document.

(Tutorials for working with MS Excel and MS Word can be found through theTutoring Services and Tutorials link at the top of the page.)

In your MS Word document, below your imported graph, respond to the following:

  1. Explain how the Laws of Supply and Demand are illustrated in this graph.
  2. Describe the equilibrium price and quantity in this market.
  3. Assume that the government imposes a price floor of $12 in the E-Book market. Explain what would happen in this market.
  4. Assume that the price floor is removed and a price ceiling is imposed at $6. Explain what would happen in this market.
  5. Now, assume that the price of E-Readers (used with E-Books) drops from $60 by fifty percent. How would this change impact the demand for E-Books? Explain your answer. Then, reconstruct your original graph to show this change and place it in your MS Word document below your explanation.
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