ECN 104 Lecture 5: ECN 104 - Lecture 5 - Supply, Demand and Governemt Policy

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silverrat888

30 Oct 2015

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Ecn 104 lecture 5 supply demand and government policy. Controls on prices: price ceiling : a legal max on the price at which a good can be sold, price floor : a legal min on the price at which a good can be sold. If price ceiling is below the equilibrium then the market price will equal the price ceiling (shortage) If price ceiling is above the equilibrium then the market price will equal the equilibrium price, price ceiling has no affect. If price floor is above the equilibrium then the market price will equal floor price (surplus) If price floor is below the equilibrium then the market price will equal the equilibrium price. Evaluating price controls: prices have a crucial job of balancing supply and demand and thereby coordinating economic activity, price controlled is aimed at helping the poor. Minimum wage laws: yet price control actually affect these people.

Related Questions

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

Suppose the demand function for a product is Q= 200 -15P + 4I where P is the per-unit price of the good, I is median household income in thousands of dollars, and Q is the number of units demanded per month. Use the equation and assume that median family income remains at $30,000.

a. If the equation for the supply curve is Q = 40P - 10, calculate the equilibrium price and for this good. How much will be bought and sold?

b. If the government imposes a price ceiling at $5, Will a shortage or surplus result? How large will it be?

c. If the government instead imposes a price ceiling at $11, what will the impact be? Explain.

amaranthleopard704

A.How do Minimum Wage Laws affect the equilibrium in the Labor Market?

B. For your selected product, if the government places a mandated price ABOVE the equilibrium price, how would this affect the market equilibrium?

C. Would you rather have the forces of demand and supply determine the price of gasoline, or would you prefer a government-mandated price ceiling? What problems would a price ceiling on gasoline bring in this market?

D. In conclusion, there are two different schools of thought on how to lower gasoline prices and reduce U.S. dependence on foreign oil. One is to increase SUPPLY of oil (drilling offshore), and the other is to decrease DEMAND (finding alternatives to oil). Can you graph how these two changes will bring about lower gas prices? Which one do you support?

ECN 104 Lecture 5: ECN 104 - Lecture 5 - Supply, Demand and Governemt Policy

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