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
Want to see more full solutions like this?
Chapter 8 Solutions
Krugman's Economics For The Ap® Course
- Problema 4 (20 puntos): Supongamos que tenemos un ingreso de $120 y enfrentamos los precios P₁ =6 y P₂ =4. Nuestra función de utilidad es: U(x1, x2) = x0.4x0.6 a) Planteen el problema de optimización y obtengan las condiciones de primer orden. b) Encuentren el consumo óptimo de x1 y x2. c) ¿Cómo cambiará nuestra elección óptima si el ingreso aumenta a $180?arrow_forwardPlease draw the graph for number 4 and 5, I appreciate it!!arrow_forwardnot use ai pleasearrow_forward
- not use ai pleasearrow_forward• Prismatic Cards: A prismatic card will be a card that counts as having every suit. We will denote, e.g., a prismatic Queen card by Q*. With this notation, 2.3045 Q would be a double flush since every card is a diamond and a heart. • Wild Cards: A wild card counts as having every suit and every denomination. Denote wild cards with a W; if there are multiple, we will denote them W₁, W2, etc. With this notation, W2 20.30054 would be both a three-of-a-kind (three 2's) and a flush (5 diamonds). If we add multiple wild cards to the deck, they count as distinct cards, so that (e.g.) the following two hands count as "different hands" when counting: W15 5Q and W255◊♡♡♣♣ In addition, 1. Let's start with the unmodified double-suited deck. (a) Call a hand a flush house if it is a flush and a full house, i.e. if all cards share a suit and there are 3 cards of one denomination and two of another. For example, 550. house. How many different flush house hands are there? 2. Suppose we add one wild…arrow_forwardnot use ai pleasearrow_forward
- In a classic oil-drilling example, you are trying to decide whether to drill for oil on a field that might or might not contain any oil. Before making this decision, you have the option of hiring a geologist to perform some seismic tests and then predict whether there is any oil or not. You assess that if there is actually oil, the geologist will predict there is oil with probability 0.85 . You also assess that if there is no oil, the geologist will predict there is no oil with probability 0.90. Please answer the two questions below, as I am trying to ensure that I am correct. 1. Why will these two probabilities not appear on the decision tree? 2. Which probabilities will be on the decision tree?arrow_forwardAsap pleasearrow_forwardnot use ai pleasearrow_forward
- not use ai pleasearrow_forwardIn this question, you will test relative purchasing parity (PPP) using the data. Use yearly data from FRED website from 1971 to 2020: (i) The Canadian Dollars to U.S. Dollar Spot Exchange Rate (ER) (ii) Consumer price index for Canada (CAN_CPI), and (iii) Consumer price index for the US (US_CPI). Inflation is measured by the consumer price index (CPI). The relative PPP equation is: AE CAN$/US$ ECAN$/US$ = π CAN - πUS Submit the Excel sheet that you worked on. 1. First, compute the percentage change in the exchange rate (left-hand side of the equation). Caculate the variable for each year from 1972 to 2020 in Column E (named Change_ER) of the Excel sheet. For example, for 1972, compute E3: (B3-B2)/B2). ER1972 ER1971 ER 1971 (in Excel, the formula in cellarrow_forwardnot use ai pleasearrow_forward
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education