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Suppose the government wants it to be affordable for everyone to buy peanut butter. Discuss one...


Suppose the government wants it to be affordable for everyone to buy peanut butter. Discuss one or two policies that the government could do to make that happen. Discuss the negative impact of the policy(ies).
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Answer #1

The government can put a price ceiling on the peanut butter for to make it available for every one, the price ceiling is intended to protect the consumer from the price is being too high.A binding price ceiling is set below the equilibrium price, when the price ceiling is set below the price it has a negative impact on the quantity produced. When the price ceiling is set below the equilibrium there is actually a shortage of the product that the demand in excess of the supply. This is because the profitability of the producers is comparatively low so the they produce lower quantity and this would result in the shortage of the product. The graphical representation of the price ceiling is given below.

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