Principles of Microeconomics
7th Edition
ISBN: 9781305156050
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 6, Problem 2QR
To determine
The reason behind the cause of shortage in the economy.
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What is the price ceilings role in the market?
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Suppose the Hong Kong government imposes a price ceiling above the equilibrium price of flour. How does this price ceiling affect the price and the quantity sold of flour? Explain.
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Principles of Microeconomics
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- Would society be better or worse off if the price ceiling was imposed in the market? Please explain with the aid of a graph.arrow_forwardHow does an effective price ceiling affect the quantity demanded and the quantity supplied in a competitive market? Provide an example.arrow_forwardWhat is the difference between a price ceiling and a price floor? Compared to the competitive equilibrium price, where must price ceilings and price floors be set to have an impact on the market.arrow_forward
- Explain what would be likely to happen if the government placed a price floor on milk. Suppose that the price of milk is $4/gallon, and the government prohibits anyone from selling milk for less than $5/gallon. Your answer should consist of a complete well-written paragraph using complete sentences as well as a supply and demand diagram.arrow_forwardWhat is the impact of a simultaneous increase of supply and a decrease in demand on the marketarrow_forwardSuppose the Hong Kong government imposes a price ceiling above the equilibrium price offlour. How does this price ceiling affect the price and the quantity sold of flour? Please explain.arrow_forward
- How can a price ceiling make consumers better off? Under what conditions might it make them worse off?arrow_forwardSome cities impose rent control laws, which are price controls or limits on the price of rental accommodations (apartments, houses, and mobile homes). New York City alone had over two million rent-controlled apartments in the early 1950s, but only about 27,000 as of 2014. Show the effect of a rent control law on the equilibrium rental price and the quantity of N.Y. apartments. Show the amount of excess demand on your supply-and-demand diagram. Consider the market rental dwellings in New York illustrated in the figure to the right. Suppose the maximum rent with New York's laws is p. 1.) Using the point drawing tool, indicate the quantity of rental dwellings demanded and the market rent with the rent control laws. Label this point 'ed.' 2.) Using the point drawing tool, indicate the quantity of rental dwellings supplied and the market rent with the rent control laws. Label this point 'es.' Carefully follow the instructions above, and only draw the required objects. P, rent Q Q, quantity…arrow_forwardThe Organization for the Promotion of Brussels Sprouts has convinced the government of Ironia to institute a price floor on the sale of Brussels sprouts at $8 per bushel. Demand is given by:P = 9 – Qand supply by:P = 2Q,where Q is measured in thousands of bushels.Instructions: Round your answers to the nearest whole number.a. At market equilibrium, the price is $ per bushel and the equilibrium quantity is thousand bushels.b. With the price floor, the price is $ per bushel and the quantity sold is thousand bushels.c. The excess quantity supplied of Brussels sprouts produced with the price floor is thousand bushels.arrow_forward
- Suppose the government sets a price ceiling above the equilibrium price for milk. Which of the following will be the result?arrow_forwardIn India, to protect the farmers from the low price, the government decided to increase the price of farm products. Accordingly, the government increased the price and fixed the price above the equilibrium price. What do you call this type of pricing? a. Price ceiling b. Market price c. Maximum price d. Price floorarrow_forwardWhat are the side effects of price ceilings? How might price ceilings affect the supply of goods and services that are subject to the price ceilings? Do you agree or disagree with price ceilings? Why or why not? Do you agree or disagree with laws against price gouging? Why or why not?arrow_forward
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