Essentials of Economics (MindTap Course List)
8th Edition
ISBN: 9781337091992
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 6, Problem 3QR
To determine
The mechanisms that allocate resources when price is not allowed to bring the
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Can the market / price mechanism find some solutions?
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Chapter 6 Solutions
Essentials of Economics (MindTap Course List)
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- What are the possible reasons why the government may make a market intervention? What are the possible implications of such interventions? How might the wedge between consumers and firms lead to market distortions?arrow_forwardWhich of the following is NOT a way that the government can intervene in markets? a)The government can set minimum wages. b)The government can raise taxes on a particular item. c)The government can pass laws on sales taxes. d)The government can stop the forces of demand and supply from working in markets.arrow_forwardExplain why economists usually oppose controls on prices.arrow_forward
- Describe how a shift of the demand or supply curve can affect equilibriumarrow_forwardWhen a market is competitive and functioning properly, economic theory predicts that the market equilibrium will be efficient. However, this may not always be the desired outcome. Market outcomes may be unequal or distorted by market failure. Offer an example of a market where you consider the real-world outcome to be unacceptable. Why is the market outcome unacceptable? How can government policy improve on the market equilibrium? Will this solution create a surplus or shortage in the market according to economic theory? Explain. What effect will this solution have on consumer surplus, producer surplus, social surplus, and deadweight loss? Explain.arrow_forwardHow does a market reach equilibrium without any outside intervention? Explain using the supply and demand concept.arrow_forward
- can policy market interventions cause consumer or producer surplus? Explain why using specific reasoning.arrow_forwardHow do prices communicate to economic actors?arrow_forwardAfter defining a ‘market mechanism’ and the ‘law of supply and demand’, explain how higher education can be affected by market changes, and how economic theory can understand such changes (Duff, 1997).arrow_forward
- If there is a decrease in supply and demand, how will equilibrium price and quantity be affected?arrow_forwardWhat mechanisms allocate resources when the price of a good is not allowed to bring supply and demand into equilibrium?When the price of a good is not allowed to bring supply and demand into equilibrium, some alternative mechanism must allocate resources. If quantity supplied exceeds quantity demanded, so that there is a surplus of a good as in the case of a binding price floor, sellers may try to appeal to the personal biases of the buyers. If quantity demanded exceeds quantity supplied, so that there is a shortage of a good as in the case of a binding price ceiling, sellers can ration the good according to their personal biases, or make buyers wait in line.arrow_forwardWhat impact do policy interventions have on the supply and demand equilibrium for a product?arrow_forward
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