Consider the market for outdoor porch swings. The following graph shows the supply and the demand curve of the good. Assume that the price of home and garden goods is regulated, and the price of outdoor swings cannot exceed Preg, also shown on the graph below. The letters A to K denote certain areas on the graph. What area represents the consumer surplus (CS) in the absence of any regulation? What about producer surplus (PS)? What about total (economic) surplus (TS)? Is there a deadweight loss (DWL) if the price is not regulated? If yes, what area represents this DWL?
Consider the market for outdoor porch swings. The following graph shows the supply and the
What area represents the
Price controls are described as the economic tool utilized by the government to restrict price changes of certain goods and services. The government sets the minimum or maximum price of goods and services directly in a free market.
Step by step
Solved in 2 steps
