Using the supply and demand model below, carefully explain any changes to the free market equilibrium when the government imposes a binding price ceiling to regulate the market for toilet paper. Could you teach me what happens when the government sets a binding price ceiling to control this market?
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Could you teach me what happens when the government sets a binding price ceiling to control this market?
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- 1.1 Using the diagram below, defend the point that a free market will always move from disequilibrium to equilibrium according to demand and supply theory. Price P P P₂ Excess supply Excess demand le Quantity SConcerned about the political fallout from rising gas prices, suppose that the U.S. government imposes a price ceiling of $3.00 a gallon on gasoline. Explain how the market for gasoline would react to this price ceiling if a global shortage of oil sent the equilibrium price of gasoline to $3.50 a gallon. Would the U.S. gasoline market be efficient?unit(s) of this good are no longer being produced and consumed per day compared to the free-market equilibrium. (Round your response to the nearest whole number as needed.) d. Calculate the deadweight loss that results from the imposition of the price ceiling at $14. The deadweight loss that results from the imposition of the price ceiling at $14 is $ per day. (Round your response to the nearest cent as needed.) e. Calculate the total economic surplus in this market when a price floor at $22 is in effect. The total economic surplus is $ per day. (Round your response to the nearest cent as needed.) f. Calculate the deadweight loss that results from the imposition of the price floor at $22. The deadweight loss that results from the imposition of the price floor at $22 is $ per day. (Round your response to the nearest cent as needed.) 38.00 34.00- Price ($) 30.00- 26.00- €22.00- 18.00- 14.00- 10.00- 6.00- 2.00- 20 60 80 100 120 40 Quantity (units per day) S 140
- Supply and demand are powerful forces in a free market. In four to five sentences, explain some of the factors that cause shifts in supply and demand and what the effects of these shifts are.When 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.Illustrate on a supply and demand diagram how price ceilings may distort the market outcome, and specify what secondary effects price ceilings can create.
- Imagine that to preserve the traditional way of life in small fishing villages, a government decides to impose a price floor that will guarantee all fishermen a certain price for their catch. Using the demand and supply framework, predict the effects on the price, quantity demanded, and quantity supplied. With the enactment of this price floor for fish, what are some of the likely unintended consequences in the market? Suggest some policies other than the price floor to make it possible for small fishing villages to continue.ECON 201 (Section E) – Homework 4 Name: Question 1: Suppose the market for cigarettes can be represented by the following demand and supply Q = 5000 – 20P Q = 40P – 400 equations: a) Find the free market equilibrium: price, quantity, CS, PS, and TS. Graph the market below. b) Suppose the government comes in and adds a tax on each box of cigarettes sold and makes consumers pay for this tax (when they buy the good). The new demand curve with tax is Q = 5000 – 20(P + 10). Graph the situation below. Calculate the new equilibrium price and quantity with the tax; how much the tax is per box of cigarettes; the new CS, PS, Tax Revenue, and TS; the DWL the tax creates (if any). i. ii. ii. iv.Explain why price moves towards equilibrium in a free market and why the equilibrium price may change over time.
- 1. Suppose the government passes a rent control law. a) what would happen to the quantity demanded and the quantity supplied of the apartments? b) would a shortage or surplus result? Show the shortage or surplus in your graph. c)would the amount of market exchange increase or decrease or remain the same? Explain carefully. Please support answers with a graph and explain.Suppose that the government sets a price floor for milk that is above the competitive equilibrium price. Identify the price and quantity sold when there is a price floor. Then show the change in economic surplus caused by the price floor. (Note: If you have trouble graphing the triangle, be sure to drag the "Quantity sold" label out of your way so that you can plot all three triangle points.) 20- Supply 18- 16- 1.) Use the point drawing tool to identify the quantity that is sold and the price with the price floor. Label the point "Quantity sold'. 14- Price floor 2.) Use the triangle drawing tool to shade the change in economic surplus as a result of the price floor. If there is an increase in surplus, label it 'new economic surplus'; if there is a decrease in surplus, label it 'deadweight loss. 12- 10- Carefully follow the instructions above, and only draw the required objects. 8- 6- 4- 2- Demand 12 16 20 24 Quantity of milk 28 32 36 40 Clear All Ch Help Me Solve This eText Pages Get…What are the different price controls that governments use to influence the market. Using appropriate diagrams, state the effect of each of the price control mechanisms. Assume government fixes the price of human organs at 0, what will be the effect of such a move?
