Question

5. in order to allow affordable access to all provincial parks, the government tries to set below market prices. This could be seen as an example of a price ceiling. Discuss the effect on the price, availability, fairness, winners and losers using a suitable diagram. Assume that the free market price of a campsite at Manning park in the summer would be $30 a night, and the government sets a price of $25 a night.

6. Analyze the following statement: Federal farm price supports can never achieve their goals because the above equilibrium price floors that are established by the Ministry of Agriculture invariably create surpluses, which in turn drive prices back down to their original equilibrium.

Answer 1

Due to presence of HOMEWORKLIB POLICY, I am answering one question.

5.

Ans: A price ceiling is a government- or group-imposed price control, or limit, on how high a price is charged for a product, commodity, or service. Governments use price ceilings to protect consumers from conditions that could make commodities prohibitively expensive.

Price availability: Legal price = 25 can be charged to consumers which is below equilibrium price of 30.

Fairness: This makes producers worse off but makes consumers better off to some extent. As a whole, total surplus decreases and market gets worse off.

Winners: Consumers

Losers: Producers

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