Question

Think of some examples where the price of a good or service is kept below the equilibrium. In each case consider the advantages and disadvantages of the policy. 2. 3.In most countries in South America, the legal driving age is 18. If the legal driving age in the United States was raised from 16 to 18, how would this affect the market for new and used automobiles? What would happen to the equilibrium price and quantity of new and used automobiles? 4.In each of the following situations, list what will happen to the equilibrium price and the equilibrium quantity for a particular product, which is an inferior good The population increases and productivity a increases b. The income increases and the price of inputs decrease The number of firms in the market decreases c. and income increases. d. Consumer preference increases and the price of a complement decreases. The price of a substitute in consumption decreases and the price of a substitute in production decreases

Answer 1

ans 2=

A ‘price ceiling’ is a mandated maximum sum a seller is permitted to charge for a commodity. Generally established by law, price ceilings are in general applied only to staples like foodstuff & energy products when such articles become unaffordable to regular customers. Some regions have rental ceilings to shield renters from rapidly escalating rates on dwellings.

A ‘price ceiling’ is basically a kind of price control. ‘Price ceilings’ can be beneficial in letting essentials become affordable, at least for the short term. But , economists question how advantageous such ceilings are in the long-term.

Whilst ‘price ceilings’ might appear to be an obviously good thing for customers, they also carry drawbacks. Certainly, costs fall in the short-run, which can promote demand. However, firms need to find some method to counteract the price (& profit) controls. They may restrict supply, curtail production / quality, or charge more for (previously free) options / features. As an outcome, economists wonder how effectual ‘price ceilings’ can be at safeguarding the most vulnerable customers from high costs / even shielding them at all.

A wider & more theoretical concern about ‘price ceilings’ is that they cause a deadweight loss to the community. This terminology to explain an economic deficiency, caused by an ineffectual allocation of resources, which disrupts the equilibrium of a market & contributes to rendering it more ineffectual.