Below, you are provided with the demand and supply schedules for jars of peanut butter. You will use this information to analyze the effect of a price ceiling on the price of a jar of peanut butter, and to identify whether the price ceiling leads to a shortage or a surplus of peanut butter. Price Jars of Peanut Butter Demanded Jars of Peanut Butter Supplied $2.00 2,500 1,000 $2.50 2,250 1,250 $3.00 2,000 1,500 $3.50 1,750 1,750 $4.00 1,500 2,000 Part 1 : Identify the equilibrium price of a jar of peanut butter. Part 2 : Suppose that the government imposes a price ceiling of $2.50 per jar of peanut butter. Is this price ceiling set above or below the equilibrium price? Part 3 : Suppose that the government imposes a price ceiling of $2.50 per jar of peanut butter. What is the resulting market price of a jar of peanut butter? Part 4 : Suppose that the government imposes a price ceiling of $2.50 per jar of peanut butter. Does this lead to a shortage of jars of peanut butter? Or a surplus of jars of peanut butter? Or neither? Part 5 : Suppose that the government imposes a price ceiling of $2.50 per jar of peanut butter. If this creates a shortage or surplus of jars of peanut butter (as you identified in Part 4), how large is that shortage or surplus? Part 6 : Suppose that the government imposes a price ceiling of $4.00 per jar of peanut butter. Is this price ceiling set above or below the equilibrium price? Part 7 : Suppose that the government imposes a price ceiling of $4.00 per jar of peanut butter. What is the resulting market price of a jar of peanut butter? Part 8 : Suppose that the government imposes a price ceiling of $4.00 per jar of peanut butter. Does this lead to a shortage of jars of peanut butter? Or a surplus of jars of peanut butter? Or neither? Part 9 : Suppose that the government imposes a price ceiling of $4.00 per jar of peanut butter. If this creates a shortage or surplus of jars of peanut butter (as you identified in Part 8), how large is that shortage or surplus? Part 10 : Complete the statement below. When a price ceiling is imposed __________________ (above, below) the equilibrium price of a good or service, a __________________ (shortage, surplus) is created.
Below, you are provided with the demand and supply schedules for jars of peanut
butter. You will use this information
to
analyze the effect of a
price of a jar of peanut butter, and to identify whether the price ceiling leads to a
shortage or a surplus of peanut butter.
Price Jars of Peanut Butter Demanded Jars of Peanut Butter Supplied
$2.00 2,500 1,000
$2.50 2,250 1,250
$3.00 2,000 1,500
$3.50 1,750 1,750
$4.00 1,500 2,000
Part 1
: Identify the
Part 2
: Suppose that the government imposes a price ceiling of $2.50 per jar of
peanut butter. Is this price ceiling set above or below the equilibrium price?
Part 3
: Suppose that the government imposes a price ceiling of $2.50 per jar of
peanut butter. What is the resulting market price of a jar of peanut butter?
Part 4
: Suppose that the government imposes a price ceiling of $2.50 per jar of
peanut butter. Does this lead to a shortage of jars of peanut butter? Or a surplus of
jars of peanut butter? Or neither?
Part 5
: Suppose that the government imposes a price ceiling of $2.50 per jar of
peanut butter. If this creates a shortage or surplus of jars of peanut butter (as you
identified in Part 4), how large is that shortage or surplus?
Part 6
: Suppose that the government imposes a price ceiling of $4.00 per jar of
peanut butter. Is this price ceiling set above or below the equilibrium price?
Part 7
: Suppose that the government imposes a price ceiling of $4.00 per jar of
peanut butter. What is the resulting market price of a jar of peanut butter?
Part 8
: Suppose that the government imposes a price ceiling of $4.00 per jar of
peanut butter. Does this lead to a shortage of jars of peanut butter? Or a surplus of
jars of peanut butter? Or neither?
Part 9
: Suppose that the government imposes a price ceiling of $4.00 per jar of
peanut butter. If this creates a shortage or surplus of jars of peanut butter (as you
identified in Part 8), how large is that shortage or surplus?
Part 10
: Complete the statement below.
When a price ceiling is imposed __________________ (above, below) the
equilibrium price of a good or service, a __________________ (shortage,
surplus) is created.
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