Question

Consider the information in the table below for a typical market. Use the information from the...

Consider the information in the table below for a typical market. Use the information from the table to answer the questions (a) through (i) below.

Price Quantity Demanded Quantity Supplied
0 21 0
1 18 4
2 15 8
3 12 12
4 9 16
5 6 20
6 3 24
7 0 28

a. If the government set a price ceiling at $2, would there be a shortage or surplus, and how large would be the shortage/surplus?

b. If the government set a price ceiling at $4, would there be a shortage or surplus, and how large would be the shortage/surplus?

c. If the government set a price floor at $4, would there be a shortage or surplus, and how large would be the shortage/surplus?

d. If the government set a price floor at $2, would there be a shortage or surplus, and how large would be the shortage/surplus?

e. In this market, over what range of prices would a price ceiling set by the government be binding?

f. In this market, over what range of prices would a price floor set by the government be binding?

g. Why would policymakers choose to impose a price ceiling or price floor in this market?

h. Assuming, the government want to enact rent control laws. But since this policy might bring some inefficiency in the market, proposed a policy that the government can use to help renters other than the rental ceiling.

i. Assuming, the government want to enact minimum wage laws. But since this policy might bring some inefficiency in the market like can bring about unemployment to teens and unskilled workers, proposed a policy that the government can use to help workers other than the minimum wage law.

Homework Answers

Answer #1

a) At price of $2, quantity demanded is greater than quantity supplied. So, there is shortage of goods in the market.

Shortage = Qd - Qs = 15 - 8 = 7 units

b) Price ceiling is effective when price is set below equilibrium price. Equilibrium price is $ 3 when price ceiling is set above $ 3 then it becomes ineffective.

c) At price of $ 4, quantity supplied is greater than quantity demanded so there is surplus of good in the market.

Surplus = Qs - Qd = 16 - 9 = 7 units

d) At price of $ 2, price floor is ineffective because price floor is effective till it is set above market equilibrium price.

e) Price ceiling is binding till price is set below equilibrium market price i.e price set between 0 and 3 is binding.

f) Price floor is binding till price is set above equilibrium market price i.e. price set above $ 3. Range varies between $ 3 to $ 7.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A government has just imposed a binding price floor on the market for widgets. Anthony claims...
A government has just imposed a binding price floor on the market for widgets. Anthony claims that this policy will reduce the total revenue of widget manufacturers. Is Anthony correct? Yes. A binding price floor will always reduce the revenue of the producers. Maybe. A binding price floor will reduce the producer's revenue when demand is elastic. Given a model of a perfectly competitive market for unskilled labor, a minimum wage that is set above a market's equilibrium wage will...
A market is described by the following supply and demand curves: QSQS =  = 3P3P QDQD =  =...
A market is described by the following supply and demand curves: QSQS =  = 3P3P QDQD =  = 400−P400−P The equilibrium price is______ and the equilibrium quantity is_______ . Suppose the government imposes a price ceiling of $80. This price ceiling is (binding or not binding) , and the market price will be . The quantity supplied will be______ , and the quantity demanded will be_____ . Therefore, a price ceiling of $80 will result in (a shortage, neither a shortage nor...
(30)Consider the market for chicken, if consumers use chicken and beef as substitutes, an increase in...
(30)Consider the market for chicken, if consumers use chicken and beef as substitutes, an increase in the price of beef given ceteris paribus will: (a)Decrease the demand for chicken creating a lower price and a smaller amount of chicken will be purchased in the market (b)Increase the supply of beef creating a surplus of beef in the market and a smaller quantity of chicken purchased in the market (c)(a) or (b) above            (d)None of the above (31)Which of the following...
1. [Market Equilibrium] Following table shows information about the demand for apples in the wholesale market....
1. [Market Equilibrium] Following table shows information about the demand for apples in the wholesale market. Price, P ($/lb) Quantity Qd (lbs) 10/0 8/4 6/8 4/12 2/16 (a) Draw a graph with Price (P) on the vertical axis and Quantity demanded (Qd) on the horizontal axis? (b) Write the equation for this inverse demand function. (c) What is the quantity demanded when P = $3/lb? Following table shows information about the supply of 20 lbs box of apples in the...
3. Consider a competitive market with the following demand and supply curves: ?? = 600−100?, ??...
3. Consider a competitive market with the following demand and supply curves: ?? = 600−100?, ?? = −150+150? b. If government imposes a price of P5.00, is this a price ceiling or price floor? Will there be a shortage or surplus? If so, by how much will the shortage or surplus be?
In general, what is a price ceiling? Group of answer choices A price ceiling sets the...
In general, what is a price ceiling? Group of answer choices A price ceiling sets the maximum price at which a good can be legally sold. A price ceiling sets the minimum price at which a good can be legally sold. A price ceiling comes in the form of a minimum wage none of the above Flag this Question Question 21 pts In general, what is a price floor? Group of answer choices A price floor sets the maximum price...
I am having trouble visualizing/drawing this graph so that I can answer this question. --------------- Consider...
I am having trouble visualizing/drawing this graph so that I can answer this question. --------------- Consider the market for hamburgers. Suppose that, in a competitive market without government regulations, the equilibrium price of hamburgers is $7 each, and employees at fast-food restaurants earn $19.50 per hour. Complete the following table by indicating whether each of the statements is an example of a price ceiling or a price floor and whether it results in a shortage or a surplus or has...
Describe who the suppliers and demanders are in the labor market. Is a government-mandated minimum wage...
Describe who the suppliers and demanders are in the labor market. Is a government-mandated minimum wage a price floor or ceiling? Discuss the effect of a minimum wage law from a supply and demand standpoint, making sure to address the concept of surplus or shortage.(200 words)
Following table shows information about the demand for apples in the wholesale mar- ket. Price, P...
Following table shows information about the demand for apples in the wholesale mar- ket. Price, P ($/lb) Quantity Qd (lbs) 10. 0 8. 4 6 8 4. 12 2 16 (a) Draw a graph with Price (P) on the vertical axis and Quantity demanded (Qd) on the horizontal axis? (b) Write the equation for this inverse demand function. (c) What is the quantity demanded when P = $3/lb? Following table shows information about the supply of 20 lbs box of...
1- Create a hypothetical market (make a table showing values for Supply and Demand) 2- Write...
1- Create a hypothetical market (make a table showing values for Supply and Demand) 2- Write The supply & demand equations showing the slope and intercept. 3- Calculate consumer surplus and producer surplus in this market. 4- Show on two separate graphs the impact of a price floor and a price ceiling on the market. On each graph show the market shortage and market surplus resulted from Price ceiling and Price floor. plesse show table