Define price ceiling and price floor and give an example of each.

M Rising Fertilizer Prices Prospects for the fertilizer sector are exceptional this year. Grain prices have sky rocketed, stimulating greater plantings of grain and greater demand for fertizer The price of fertilizer has soared from US$350 to more than US$600 per tonne during the past year. Source National Post, June 21, 2011 Suppose that the government tries to halt the fertilizer price rise and sets a price ceiling below the equilibrium price mr How would the price celling influence the quantity of fertilizer sold and the shortage or surplus of fertilizer? How would the price celling influence the maximum price that a farmer is willing to pay for the last tonne of fertilizer available on an illicit market? an The price ceiling. OA. decreases OB. increases OC. does not change OD. sometimes increases and sometimes decreases the maximum price that someone is willing to pay for the last tonne of fertilizer available on an illicit market.

Imagine that students lobby university administrators to increase the wage of tutors on campus from $10 per hour to $15 per hour. The graph below shows a hypothetical market for economics tutors after this price floor is enacted. The price floor creates a(n) of tutors. O Shortage; 5 Price S $20 $15 $10 D 1012 Quantity (tutors)

Suppose the government forces the price to be below the equilibrium.  Is this called a price floor or a price ceiling? Explain why the government might do this and the likely economic impact of the price floor or ceiling.   Then, explain how market forces will attempt to move the market price to equilibrium.