Question

in august, Canadians can buy corn on the cob for 3.5$ per dozen. In the winter, packages of five cobs sell for 11$ per dozen.
a.(2 points) Explain the seasonal increase in corn prices. Explain thoroughly with words + graph
b.(3 points) Why does the govt not attempt to protect consumers against such price increases by placing legal limits on corn prices? Explain thoroughly with words + graph

Answer 1

A) In winters, due to harsh weather conditions, production of crops and corns takes a hit and produce gets drastically reduced. As a result, supply of corn in the market gets reduced, shifting supply curve to the left.

As one can see above, a leftward shift of supply curve leads to an increase in price of corn from $3.5 to $11 per dozen.

B) Placing legal limits on corn prices would eventually harm the consumers instead of helping them.

If a legal limit of Pc is placed, at that price, Qd > Qs, leading to shortage of corn in the market. People who are willing to pay high prices to obtain corn would also not end up having them, making them worse off.