Price Controls and Quotas: Meddling 1. In order to ingratiate himself with vote lower the price of taxi rides. Assume, for distance and therefore cost the same. The supply schedules for taxi rides. c. Suppose that the stock market crashes poorer. This reduces the quantity of taxi at any given price. Illustrate this change i to the scale on the quantity axis. Fare (S/ride) 7.0 65 60 5.5 5.0 45 Market for taxi rides 6 9 12 14
Price Controls and Quotas: Meddling 1. In order to ingratiate himself with vote lower the price of taxi rides. Assume, for distance and therefore cost the same. The supply schedules for taxi rides. c. Suppose that the stock market crashes poorer. This reduces the quantity of taxi at any given price. Illustrate this change i to the scale on the quantity axis. Fare (S/ride) 7.0 65 60 5.5 5.0 45 Market for taxi rides 6 9 12 14
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Price Controls and Quotas: Meddling with Markets - End of Chapter Problems
1. In order to ingratiate himself with voters, the mayor of Gotham City decides to
lower the price of taxi rides. Assume, for simplicity, that all taxi rides are the same
distance and therefore cost the same. The accompanying table shows the demand and
supply schedules for taxi rides.
c. Suppose that the stock market crashes, and, as a result, people in Gotham City are
poorer. This reduces the quantity of taxi rides demanded by 6 million rides per year
at any given price. Illustrate this change in the market below, paying special attention
to the scale on the quantity axis.
Fare (S/ride)
7.0
65
6.0
5.5
5.0
45
0
2
4
Market for taxi rides
6 8
10 12
14
D
16
18 20
22
Quantity of rides
(millions per year)
Quantity Quantity
Fare
(per ride) demanded supplied
$7.00
10
12
6.50
11
10
6.00
5.50
5.00
4.50
11
12
13
14
15
What effect will the mayor's new policy have now?
O It will force the market into equilibrium.
O It will have no effect.
O A surplus of 2 million rides per year
OA shortage of 2 million rides per year
9
8
7
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