Essentials of Economics
4th Edition
ISBN: 9781464186653
Author: Paul Krugman, Robin Wells
Publisher: Worth Publishers
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Chapter 4, Problem 5P
To determine
equilibrium price and quantity- shortage of rides due to
price ceiling
- Reduced
demand due to crashed stock market.
- Operating licenses restricting the number of rides to 10 million per year.
Concept Introduction
Equilibrium Price: The equilibrium price is the market price at which the quantity demanded by the consumers equals the quantity supplied by the producers.
Price Ceiling: In the situation of crisis, when the prices are expected to rise suddenly, the government imposes ceilings on the price to ensure that the prices are not charged unreasonably and price cannot be increased beyond that ceiling.
Quantity Control or Quota: The government intervenes by specifying a limit of quantity that can be bought or sold in the market. The quantity of goods or services that can be bought or sold under such system is known as quota limit.
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Chapter 4 Solutions
Essentials of Economics
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