The government often meddles in markets, using price ceilings and price floors and taxes which move the market away from free market equilibrium. Should the government meddle in markets? When should it meddle? In answering this question, everyone should also consider discussing: Should there be rent controls or other price ceilings? Should the government set a minimum wage be $15? Should the government control the price of life saving medicine, such as insulin? Should they set a price ceiling? Or use taxes? How does elasticity of demand affect who will pay the tax? What are some reasons that the government should meddle in markets using price controls and taxes?

The government often meddles in markets, using price ceilings and price floors and taxes which move the market away from free market equilibrium. Should the government meddle in markets? When should it meddle? In answering this question, everyone should also consider discussing: Should there be rent controls or other price ceilings? Should the government set a minimum wage be $15? Should the government control the price of life saving medicine, such as insulin? Should they set a price ceiling? Or use taxes? How does elasticity of demand affect who will pay the tax? What are some reasons that the government should meddle in markets using price controls and taxes?

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter4: Prices: Free, Controlled, And Relative

Section: Chapter Questions

Problem 5QP

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A nation with a low income chooses to set a price ceiling on bread to guarantee that it is affordable for the poor. The table below shows the supply and demand parameters. Before the price ceiling, what were the equilibrium price and equilibrium quantity? If the price ceiling is set at $2.40 what would the excess demand or the shortage (quantity demanded minus quantity supplied) be? What about at $2.00? Or at $3.60? Draw graphs to present your solutions. Price M༔TM ༥་༥ ༧༥FF, ༔vi Qd Qs $1.60 9,000 5,000 $2.00 8,500 5,500 $2.40 8,000 6,400 $2.80 7,500 7,500 $3.20 7,000 9,000 $3.60 6,500 11,000 $4.00 6,000 15,000
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