Suppose the supply curve for a good is completely inelastic. If the government imposed a price ceiling below the market-clearing level, would a deadweight loss result? Explain.

Study Guide for Microeconomics

9th Edition

ISBN: 9780134741123

Author: Robert Pindyck, Daniel Rubinfeld

Publisher: PEARSON

See similar textbooks

Videos

Textbook Question

Chapter 9, Problem 2RQ

Suppose the supply curve for a good is completely inelastic. If the government imposed a price ceiling below the market-clearing level, would a deadweight loss result? Explain.

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Chapter 9, Problem 1RQ

Chapter 9, Problem 3RQ

Students have asked these similar questions

Consider a market with a demand curve given by P = 1000 - 2Q and a supply curve given by P = 3Q. Suppose the government imposes a price ceiling of 800 dollars. What is the deadweight loss? Give your answer as a whole number.

Explain why the imposition of the price ceiling does not result in a deadweight loss.

Does a binding price floor always leads to an increase in producer surplus?

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Suppose the demand for live comedy performance tickets is downward sloping and the supply of live comedy performance tickets is upward sloping. Lovers of comedy persuade Congress to impose a price ceiling of $40 per ticket for live comedy performances. True or False: If the equilibrium price of live comedy performance tickets were $40, a price ceiling of $40 will cause more people to attend comedy performances than if there is no price control.
The following graph shows a demand curve (in blue) and a supply curve (in orange). Suppose a price ceiling of $3 per unit is imposed. Use the grey points (star symbols) to shade the area representing the deadweight loss resulting from the price ceiling. The following graph shows a demand curve (in blue) and a supply curve (in orange). Suppose a price ceiling of $12 per unit is imposed. Use the green points (triangle symbols) to shade the area representing producers’ surplus after the price ceiling. Then use the purple points (diamond symbols) to shade the area representing consumers’ surplus after the price ceiling. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
The demand curve for wheat is Q=140−10p Supply curve is Q=10p. Equilibrium quantity is 70. Equilibrium price is $7. The government imposes a price ceiling of p=$3 per unit. Equilibrium quantity with the price ceiling is 30. What effect does this ceiling have on consumer surplus, producer surplus, and deadweight loss?

Recommended textbooks for you

Essentials of Economics (MindTap Course List)
Economics
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Economics For Today
Economics
ISBN:9781337613040
Author:Tucker
Publisher:Cengage Learning
Micro Economics For Today
Economics
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Cengage,
MACROECONOMICS FOR TODAY
Economics
ISBN:9781337613057
Author:Tucker
Publisher:CENGAGE L
Survey Of Economics
Economics
ISBN:9781337111522
Author:Tucker, Irvin B.
Publisher:Cengage,
Microeconomics: Private and Public Choice (MindTa...
Economics
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning