Asked Oct 29, 2019
Consider the market for paper towels where the supply curve is upward sloping and the demand
curve is downward sloping.
Suppose there is an effective price ceiling applied on this market. What happens to the
consumer surplus as a result?
b. Suppose there is an effective price floor applied on this market. What happens to the consumer
surplus as a result?

Expert Answer

Step 1

a. The price ceiling is a type of price restriction imposed by the government in which a price less than the equilibrium price is set as the maximum price at which goods are being traded. With an effective price ceiling on the paper towels market in the economy, consumer surplus will tend to increase. The reason for the same is that a lower price than equilibrium price is being set as a price ceiling whic...


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