The table below shows information on demand and supply for boxes of 1 dozen water glasses. The lobbyists for the water glass producers persuade the government to establish a price floor of $48 per box. Sketch a diagram of the market for water glasses and identify the following areas.
a. Consumer surplus and producer surplus before the price floor is imposed.
b. Consumer surplus and producer surplus after the price floor is imposed.
c. The transfer of consumer surplus to producer surplus after the price floor is imposed.
d. Is the price floor economically efficient? If not, identify the area of deadweight loss.
e. Looking at the diagram, can you explain why the lobbyists for the water glass producers might argue for a price floor, even though some deadweight loss will occur?
Price $12, $24 , $36 ,$48 , $60, $72
Quantity Demanded 10,000 , 8,000 , 6,000 ,4,000 ,2,000 , 0
Quantity Supplied 0, 3,000 , 6,000 , 9,000 , 12,000 , 15,000