Question

In Allentown, PA, in the summer of 2014, the average pricve of a gallon of gasoline...

In Allentown, PA, in the summer of 2014, the average pricve of a gallon of gasoline was $3.68 - a 22 cent increase from the year before. Many customers were upset by th increase. One consumer was qouted in a local newspaper as saying, "It's Crazy. The government should step in." Suppose the governent has stepped in and imposed a price celing equal to the old price of $3.46 per gallon.

A. Draw a graph showing the effect of the price ceiling on the market for gasoline. Be sure that your graph show:

i. THe price and quantity of gasoline before and after the price celing is imposed

ii. The areas representing consumer surplus and producer surplus beofre and after the price celing is imposed

iii. The area of deadweight loss

B. Will the consumer who was complaining about the increase in the price of gasoline definitely be made better off by the price ceiling? Breify Explain.

Homework Answers

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
In a presidential campaign, a candidate proposes a 50 cent per gallon tax on gasoline. The...
In a presidential campaign, a candidate proposes a 50 cent per gallon tax on gasoline. The idea of a gasoline tax is both to raise government revenue and to reduce oil consumption and the country’s dependence on oil imports. The Demand and supply functions are given by Qd=150-50P and Qs=60+40P respectively. If the candidate is voted into power and the policy is adopted: Calculate the equilibrium quantity and price before tax.(1 mark) What will be the equilibrium quantity and price...
Suppose the equilibrium price of gasoline is $3 per gallon. a. Using the demand and supply...
Suppose the equilibrium price of gasoline is $3 per gallon. a. Using the demand and supply graph, draw this equilibrium in the space below. Make this graph large, it will be used for future questions. b. Now suppose the government imposes a binding price ceiling on this market. Identify a value for this price ceiling that would be binding and show it on the graph. Graphically show whether excess demand or excess supply would result. c. With the price ceilings,...
2. A demand curve indicate a. the maximum willingness to pay for a given quantity b.the...
2. A demand curve indicate a. the maximum willingness to pay for a given quantity b.the consumer's gain from exchange c.the market price of a good or service d. the equilibrum quantity 3. trade permitts countries to a. consume more than they capable of producing b.produce based on their comparative advantage c.specialize more fully d.all of above 4. which of the following dose not impact how elastic supply is? a. whether the supply is local or global b.the share of...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT