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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

Imagine that to preserve the traditional way of life in small fishing villages, at government decides to impose a price floor that will guarantee all fishermen a certain price for their catch.

a. Using the demand and supply framework, predict the effects on the price, quantity demanded, and quantity supplied.

b. With the enactment of this price floor for fish, what are some of the likely unintended consequences in file market?

C. Suggest some policies other than the price floor to make it possible for small fishing villages to continue.

A

To determine

The government imposes a price floor for the price of fish. EXPLANATION the following parts:

Use demand and supply analysis and show what would happen in the market.

Explanation

If the price floor is set above the equilibrium prices then it could be binding. Suppose price floor is set as P-1 in the following diagram. The price P-1 is higher than equilibrium price level P. This creates excess supply of fishes in the market or surplus in the market...

B

To determine

The government imposes a price floor for the price of fish. EXPLANATION the following parts:

What could be the possible consequences in the market due to the price floor?

C

To determine

The government imposes a price floor for the price of fish. EXPLANATION the following parts:

Mention policies other than price floor for the betterment of small fishing villages.

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