Question

I am having trouble visualizing/drawing this graph so that I can answer this question.

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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 no effect on the price and quantity that prevail in the market.

Statement	Price Control	Effect
The government prohibits fast-food restaurants from selling hamburgers for more than $5 each.	Price ceiling or price floor	Shortage, surplus, or no effect
Due to new regulations, fast food restaurants that would like to pay better wages in order to hire more workers are prohibited from paying more than $14.50 per hour.	Price ceiling or price floor	Shortage, surplus, or no effect
The government has instituted a legal minimum price of $5 each for hamburgers.	Price ceiling or floor price	Shortage, surplus, or no effect

Answer 1

1) The government prohibits fast-food restaurants from selling hamburgers for more than $5 each : Price ceiling , ( Shown in graph ) , It causes a shortage .

2) Due to new regulations, fast food restaurants that would like to pay better wages in order to hire more workers are prohibited from paying more than $14.50 per hour. : Price ceiling . Shown in second graph . Causes shortage .

3) The government has instituted a legal minimum price of $5 each for hamburgers.: Minimum price is a price floor . A price floor below the equilibrium price is not binding . Since government has set a minimum of $5 , and said nothing about maximum so $7 will prevail ( which is equilirium price ) . No effect . ( This price floor will be drawn same as first price ceiling of $5 )