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Q+ Q The above graph shows a market in equilibrium at P* and Q*. Yet, simultaneously the orange line represents a government imposed regulation on price. Based on what we see in the graph and what we know about price ceilings and price floors, answer the following: a. Is this a price ceiling or a price floor? Why? b. Will this situation cause excess demand or excess supply? Why?

Q+ Q The above graph shows a market in equilibrium at P* and Q*. Yet, simultaneously the orange line represents a government imposed regulation on price. Based on what we see in the graph and what we know about price ceilings and price floors, answer the following: a. Is this a price ceiling or a price floor? Why? b. Will this situation cause excess demand or excess supply? Why?

MACROECONOMICS
MACROECONOMICS
14th Edition
ISBN:9781337794985
Author:Baumol
Publisher:Baumol
Chapter4: Supply And Demand: An Initial Look
Section: Chapter Questions
Problem 4DQ
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Q+ Q The above graph shows a market in equilibrium at P* and Q*. Yet, simultaneously the orange line represents a government imposed regulation on price. Based on what we see in the graph and what we know about price ceilings and price floors, answer the following: a. Is this a price ceiling or a price floor? Why? b. Will this situation cause excess demand or excess supply? Why?
Transcribed Image Text:Q+ Q The above graph shows a market in equilibrium at P* and Q*. Yet, simultaneously the orange line represents a government imposed regulation on price. Based on what we see in the graph and what we know about price ceilings and price floors, answer the following: a. Is this a price ceiling or a price floor? Why? b. Will this situation cause excess demand or excess supply? Why?
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