Macroeconomics
13th Edition
ISBN: 9781337617444
Author: Roger A. Arnold
Publisher: Cengage
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Chapter 4, Problem 5QP
To determine
The supply curve and
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A government decides to set a price ceiling on eggs so that eggs are affordable to the poor. The conditions of demand and supply are given in the table below. What will the excess supply or the shortage be if the price ceiling is set at $2.00?
Price
Qd
Qs
$1.60
9,000
5,000
$2.00
8,500
5,500
$2.40
8,000
6,400
$2.80
7,500
7,500
$3.20
7,000
9,000
$3.60
6,500
11,000
$4.00
6,000
15,000
Question 50 options:
a)
8,500 excess supply.
b)
3,000 excess supply.
c)
1,500 shortage.
d)
3,000 shortage.
A government decides to set a price ceiling on bread so that bread is affordable to the poor. The conditions of demand and supply are given in the table below. What is the equilibrium price before the price ceiling? What will the excess supply or the shortage be if the price ceiling is set at $2.40?
Price
Qd
Qs
$1.60
9,000
5,000
$2.00
8,500
5,500
$2.40
8,000
6,400
$2.80
7,500
7,500
$3.20
7,000
9,000
$3.60
6,500
11,000
$4.00
6,000
15,000
A. $2.80; 1,600 shortage
B. $2.80; 1,600 excess supply
C. $2.40; 1,600 shortage
A low-income country decides to set a price ceiling on bread so it can make sure that bread is affordable to the poor. The conditions of demand and supply are given in Exhibit 10. What are the equilibrium price and equilibrium quantity before the price ceiling? What will the excess demand or the shortage if the price ceiling is set at $2.40? At $2.00? At $3.60?
Price
Qd
Qs
$1.60
9,000
5,000
$2.00
8,500
5,500
$2.40
8,000
6,400
$2.80
7,500
7,500
$3.20
7,000
9,000
$3.60
6,500
11,000
$4.00
6,000
15,000
Exhibit 10. Demand and Supply of Bread in Low-Income Country
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Similar questions
- Illustrate on a supply and demand diagram how price ceilings may distort the market outcome, and specify what secondary effects price ceilings can create.arrow_forwardSuppose that the market demand for coffee is Pd = 15 – Qd and the market supply is Ps = Qs – 5. What is the equilibrium price and quantity for coffee? Suppose that the government imposes a tax of $1 per unit to reduce coffee consumption and raise government revenues. What will be the new equilibrium quantity? What price will the buyer pay? What price will the seller receive?arrow_forwardIf the government increases the excise tax on a gallon of gasoline we can expect the supply curve to shift rightward, quantity demanded to fall, and price to rise. True or Falsearrow_forward
- How can a price ceiling make consumers better off? Under what conditions might it make them worse off?arrow_forwardWhat does each part of the graph stand for? Assume that a local government imposes a price ceiling of $8, how many units will be excessively supplied/demanded?arrow_forwardConsider a market that is initially in equilibrium and the equilibrium price and quantity are P and Q respectively. Then, the government decides to impose a price ceiling at a price of Pc that is less than P. Which of the following statements is correct? 1. After the price ceiling is imposed, the quantity demanded is less than the quantity supplied on the market. 2. After the price ceiling is imposed, the quantity actually sold in the market is lower than it was before the price ceiling was imposed. 3. Producer surplus in the market increased after the price ceiling was imposed. 4. Since Pc is less than P, the price ceiling is effective and therefore, there is no deadweight loss in the market.arrow_forward
- Housing policy analysts debate the best way to increase the number of housing units available to low-income households. One strategy-the demand-side strategy-is to provide people with housing vouchers, paid by the government, that can be used to rent housing supplied by the private market. Another-a supply-side strategy—is to have the government subsidize housing suppliers or to build public housing. Using supply and demand curves, think about the market outcomes of the supply-side and demand-side strategies. Which side do you support? Explain why.arrow_forwardIf people can't afford the equilibrium price for a good, would it be a good idea for the government to force the producer to produce it and give it to the poor people? Why or why not?arrow_forwardIs introducing a minimum price a better way of reducing consumption than trying to change peoples’ attitudes?arrow_forward
- Consider a market with an equilibrium price of $10. If the government imposes a price ceiling of $8, other things equal, the result will be as follow: A shortage will occur because the price ceiling is below the equilibrium price. A surplus will occur because the price ceiling is below the equilibrium price. The price ceiling will not affect the market which will remain at equilibrium. A surplus will occur because the price ceiling is above the equilibrium price.arrow_forwardWhat will be the result of an decrease in a price ceiling for gasoline? Group of answer choices The quantity will decrease because the quantity demanded will decrease. The quantity will remain the same; only the price will change. The quantity will increase because the quantity demanded will increase. The quantity will decrease because the quantity supplied will decrease.arrow_forwardA market is described by the following supply and demand curves: QS = 3P QD = 400−P The equilibrium price is $ and the equilibrium quantity is . Suppose the government imposes a price ceiling of $120. This price ceiling is , and the market price will be $ . The quantity supplied will be , and the quantity demanded will be . Therefore, a price ceiling of $120 will result in . Suppose the government imposes a price floor of $120. This price floor is , and the market price will be $ . The quantity supplied will be and the quantity demanded will be . Therefore, a price floor of $120 will result in . Instead of a price control, the government levies a tax on producers of $40. As a result, the new supply curve is:arrow_forward
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