Principles of Microeconomics
7th Edition
ISBN: 9781305156050
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 6, Problem 4QR
To determine
The reason why economists oppose price controls.
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how can price controls be used to avoid prices from increasing further
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Explain why economist usually oppose controls on prices.
Chapter 6 Solutions
Principles of Microeconomics
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Similar questions
- What mechanisms allocate resources when the price of a good is not allowed to bring supply and demand into equilibrium?arrow_forwardWhy do most economists oppose price ceilings and price floor? What are their negative consequences?arrow_forwardGovernment price controls like price ceilings and price floors will still lead to equilibrium between demand and supply. True or Falsearrow_forward
- Suppose demand decreases and supply decreases. Which of the following will happen? Equilibrium price will rise, fall, or stay the same while equilibrium quantity will decrease. Equilibrium price will rise, fall, or stay the same while equilibrium quantity will increase Equilibrium quantity will rise, fall, or stay the same and equilibrium price will increase. Equilibrium quantity will rise, fall, or stay the same while equilibrium price will decrease. The change in equilibrium price and quantity cannot be determined.arrow_forwardAnalyse how an increase in wages can conflict with the government objectives of price stabilityarrow_forwardExplain the conditions under which price legislation is employed in an economy.arrow_forward
- Suppose the market for steel is expressed as follows: Domestic demand: p = 40 - 0.2q, or q = 200 - 5p Domestic supply: p = 0.2q, or q = 5p Domestic supply (foreign): p = 0.1q, or q = 10p a) What is the equilibrium price and quantity if there is free trade, with no restriction on imports? b) What is the equilibrium price and quantity if the government imposes a binding import quota of 20 units? Depict parts a and b on a single graph. c) How are US steel firms affected by the quota? US automakers? Explain briefly.arrow_forwardA government decides to set a price ceiling on bread so that bread is affordable to the poor. The conditions of demand and supply are given in the table below. What is the equilibrium price before the price ceiling? What will the excess supply or the shortage be if the price ceiling is set at $2.40? Price 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 A. $2.80; 1,600 shortage B. $2.80; 1,600 excess supply C. $2.40; 1,600 shortagearrow_forwardA market is described by the following supply and demand curves: QSQS = = 4P4P QDQD = = 400−P400−P The equilibrium price is and the equilibrium quantity is . Suppose the government imposes a price ceiling of $60. This price ceiling is , and the market price will be . The quantity supplied will be , and the quantity demanded will be . Therefore, a price ceiling of $60 will result in . Suppose the government imposes a price floor of $60. This price floor is , and the market price will be . The quantity supplied will be and the quantity demanded will be . Therefore, a price floor of $60 will result in . Instead of a price control, the government levies a tax on producers of $10. As a result, the new supply curve is: QSQS = = 4(P−10)4P−10 With this tax, the market price will be , the quantity supplied will be , and the quantity demanded will be . The passage of such tax will result in .arrow_forward
- if the government imposed a price ceiling on oil and gas prices? How would this affect the market in terms of demand and supply? Would this be feasible?arrow_forwardWe've seen how many economists vehemently oppose price controls, saying that they'll create either shortages (price ceilings) or gluts (price floors). How do studies of minimum wage (a price floor) challenge this orthodoxy?arrow_forwardThere has been a great deal of movement of physicians across borders within the European Union, and this migration has raised concerns about patient safety and quality of care. Some member states havegoods and services and in sharp spikes in product prices. Governments may respond to public outcries against dramatically higher prices by imposing price ceilings to lower product prices or to keep them from rising too high. What effect would such a binding price ceiling have? Who would benefit from this policy, and who would be harmed?arrow_forward
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