ECN 104 Lecture Notes - Price Ceiling, Price Floor, Price Controls

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carminehound463

21 Mar 2013

School

Ryerson University

Department

Economics

Course

ECN 104

Professor

Tsogbadral Galaabaatar

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Document Summary

Where is a binding price ceiling shown: panel (a, panel (b, both panel (a) and panel (b, neither panel (a) nor panel (b) Figure 6-3 increase demand for the product: refer to figure 6-3. Without the price ceiling in this market for gasoline, what will happen to the price when. It will increase to p3, but a shortage will still exist. the supply curve shifts from s1 to s2: it will increase to p3 and the market will clear, it will eventually move to p2 without government assistance. What is the equilibrium price in the market before the tax is imposed: . 00, . 00, . 00, . 00, refer to figure 6-4. What is the price buyers will pay after the tax is imposed: . 00, . 00, . 00, . 00, refer to figure 6-4. What is the amount of the tax imposed in this market: . 00 per unit, . 50 per unit, . 50 per unit, . 00 per unit, refer to figure 6-4.

Related Questions

Price controls are usually enacted:

a. as a means of raising revenue for public purposes.

b. when policymakers believe that the market price of a good or service is unfair to buyers or sellers.

c. when policymakers detect inefficiencies in a market.

d. All of the above are correct

pucechinchilla834

Questions 1 and 2 do not need to be answered, they are just there for questions 3 and 4. Only bolded need answered.

1.Graph the following market demand function Q = 300-25P, plotting P (prices) on the vertical axis, and Q (quantity), on the horizontal axis. Next, show how much quantity demanded changes when the price of the good given by this demand function increases from $5 to $7?

2.Consider that the demand curve in part (a) above represents the market demand for a steak burger meal in a local area. This local area has three fast-food restaurants that exclusively produce these meals, and they are owned by Sam, Sony, and Sheila. Their supply curves for a steak burger meal are given as follows:

Sam's Eatery		Sony's Hot Meals		Sheila's "To Go"
Price ($)	Quantity	Price ($)	Quantity	Price ($)	Quantity
2.50	0	2.50	5	2.50	5
5.00	15	5.00	20	5	15
8.00	28	8.00	42	8.00	30
10.00	35	10.00	50	10.00	40
12.50	55	12.50	75	12.50	60
15.00	80	15.00	100	15.00	80

3.Consider the exercise in Question 2. The government now declares that steak burger meals in that locality should sell for $5.00. Given the correct answers in Question 1(b), would this represent a price ceiling or a price floor? Explain. Further, determine what would be the quantity of shortage or surplus that would exist in this market, and be explicit whether it is a surplus or a shortage and explain why.

4.Given the readings you looked at on price controls, what other problems typically arise, besides shortages or surpluses, when price controls are put in place within well-functioning markets?

bronzeskunk888

1.) An excise tax on a good typically reduces the net price received by the seller. (TRUE/FALSE)

2.) The burden of an excise tax on gasoline falls entirely on consumers of gasoline. (TRUE/FALSE)

3.) Rent controls are one of the few examples of a price floor in market economies. (TRUE/FALSE)

4.) Imposing a price ceiling below the equilibrium price of a good often leads to_____.

A) A greater supply of the good

B) A black market for the good

C) A rightward shift of the supply curve for the good.

D) A leftward shift of the demand curve for the good.

E) All of these

5.) Which of the following is true of price floors and ceilings?

A) Lead to the same price and quantity as in competitive market.

B) Lead to technical efficiency

C) Cause the demand curve to shift left

D) Usually result from government intervention

E) Cause the supply curve to shift right.

6.) Price ceilings often lead to black markets. (TRUE/FALSE)

7.) When minimum wage is above the equilibrium wage what occurs?

A) There will be a shortage of labor

B) There will be no effect on the number of people employed

C) There will be an increase in unemployment rate

D) There will be a decrease in unemployment rate

8.) An excise tax on a good typically reduces the price paid by the consumer (TRUE/FALSE)

9.) If a price ceiling is below the equilibrium price is imposed on a market, it will cause the quantity demanded to rise and the quantity supplied to fall. (TRUE/FALSE)

10.) Price floors often lead to black markets. (TRUE/FALSE)

11.) If an excise tax is imposed on restaurant meals what occurs?

A) Fewer meals will be produced and sold

B) More meals will be produced and sold

C) Market price of the meals will fall

D) Government tax revenue will fall.

mauveyellowjacket715

ECN 104 Lecture Notes - Price Ceiling, Price Floor, Price Controls

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