a)
The impact of the
a)
Explanation of Solution
The given scenarios represent the effect of the
After the price ceiling, homeowners do not have the incentive to give their houses on rent because they are getting rent below the equilibrium rent in the market. Due to lower rent, some house-owners think that it’s not beneficial to rent out spaces. As a result, the number of houses available for rent falls from 4000 units to 3600 units.
A price ceiling is a price control method used by the government to set the price of a product or service in the market. Purchasing or selling that product below that price would be a punishable act.
The government usually sets the price controlling method to safeguard the marginal group or a specific group, but these methods result in various types of inefficiencies in the market.
b)
The impact of the price ceiling on the given incidents.
b)
Explanation of Solution
Due to the fall in rent
c)
The impact of the price ceiling on the given incidents.
c)
Explanation of Solution
When the government sets a price ceiling at $7 for the parking space, the quantity demanded increases from 4000 units to 4400 units while the quantity supplied falls from 4000 units to 3600 units. Since the quantity demanded exceeds the quantity supplied of houses so a price ceiling generates a shortage of parking space in the market. So, few people stay without getting a parking space.
d)
The impact of the price ceiling on the given incidents.
d)
Explanation of Solution
Since there is a shortage of parking space, some fans arrive early to secure parking. The supporters' early arrival is an example of a waste of resources because they could be doing something more productive with the time they would have spent looking for parking spaces.
e)
The impact of the price ceiling on the given incidents.
e)
Explanation of Solution
The inefficient allocation of resources is demonstrated by the fact that some die-hard fans have given up while parking spaces are being allocated to some less ardent supporters. In this case, resources are distributed to those who value the good less than those who cannot consume it despite having a higher willingness to get the parking space.
f)
The impact of the price ceiling on the given incidents.
f)
Explanation of Solution
Due to the shortage of parking space, the parking-space owner has the incentive to rent spaces to the buyers and pretend they as non-paying friends and family at a higher price than $7 and pretend that buyers are friends and family customers are even ready to pay the higher price to save their time
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