In 2014, a major ice storm hit the southeastern U.S. The storm brought down power lines and trees, cutting electricity in many areas, making travel difficult, and slowing down repair crews. Heating homes became a major challenge. The storm created shortages of power generators. As a result, those products sold at prices much higher than normal. These high prices provoked cries of “price gouging” and calls on the government to impose price controls to prevent gouging. While no one likes to pay a higher price than normal for something, consider what would have happened with a price ceiling at $200 per generator. The economic intuition is revealing. Explain the economic reasoning behind your analysis based on the following points. • Diagram which illustrate the market of generator due to the factors mention in the case. • Imposition of price ceiling at $200 per generator. • Impact of price ceiling on both quantity demanded and quantity supplied. • Analyse the consequences of the government setting a price ceiling and how to over come the consequences.
In 2014, a major ice storm hit the southeastern U.S. The storm brought down power lines and trees, cutting electricity in many areas, making travel difficult, and slowing down repair crews. Heating homes became a major challenge. The storm created shortages of power generators. As a result, those products sold at prices much higher than normal. These high prices provoked cries of “
Explain the economic reasoning behind your analysis based on the following points.
• Diagram which illustrate the market of generator due to the factors mention in the case.
• Imposition of price ceiling at $200 per generator.
• Impact of price ceiling on both quantity demanded and quantity supplied.
• Analyse the consequences of the government setting a price ceiling and how to over
come the consequences.
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