Question

60. When several hurricanes hit Florida in 2004, a number of local governments imposed price controls that prevented sellers from raising their prices for badly needed products like plywood and generators. In the areas where the controls were imposed, they resulted in an expanded availability of these badily needed products b a reduced availability of these badly needed products Jan increase in the speed with which people recovered from the hurricanes more efficient allocation of these poods for which price controls were in effect 61. A politician was recently quoted as saying, "Our country can only reach full employment by raising the minimum wage, which would cause the demand for products to increase ... and eventually cause production to expand. His analysis overlooks the fact that minimum wage legislation increases costs of production and thus product prices) and create an ENCON ply unemployment of unskilled labor om is the prime cause of unemployment rull employment can only be reached by increasing the minimum wage substantially d. minimum wage legislation may increase the employment of low skilled workers, hut this will be offset by an equal reaction in the employment of skilled workers 62. Mr. Jones always buys gasoline at the corner station with his credit card. Now a new station (that does not accept credit cards) is built on the other corner and offers the same quality of gasoline for S.05 less per gallon. Is Jones irrational if he continues to buy gasoline at the old station? Yes, such action would clearly violate the law of demand. If the price is lower across the street Jones should go there. Not necessarily, he may think the case and convenience of using the credit card is worth the extra cost Yes, his actions imply that the law of diminishing returns does not apply to Ilid Nor g hinformation is given to determine if this actions are al 63. A successful advertising campaign would likely Increase price elasticity of demand by stressing the nigress of the product reduce price elasticity of demand by stressing the uniqueness of the product reduce price clasticity of demand by informing consumers of the availability of or the demand curve penerally make the demand curve shift inward 64. When a good is more broadly defined, the more substitutes it has se demand will be more prise-slastis the less substitutes it has, se demand will be more price-clastic the more substitutes it has, se demand will be less price elastic the less substitutes it has, so demand will be less price-elastic

Answer 1

Answer 60. reduced availability of badly needed products.

Reason- price control reduces the Equilibrium Price which results in los of the sellers. So sellers reduce the supply of the good in the region where price control is placed. This leads to reduced availability of the product.

Answer 61. c. minimum wage legislation increases costs of production (and thus product prices) and creates an excess supply (unemployment) of unskilled labor.

Reason- minimum wages are set above the equilibrium wages. This increases the cost of production of the good. Also when wages rises supply is greater than demand, leading to excess supply of unskilled Labor.

Answer 62.Not necessarily, he may think the case and convenience of using the credit card is worth the extra cost

Reason- The convenience of credit card leads Jones to buy from old gasoline station instead of new station.

Answer 63. reduce price elasticity of the demand by stressing the uniqueness of the product.

Reason- advertising focus on making the product look unique. Unique products have lower price elasticity of demand.

Answer 64. the less substitutes it has, so demand will be less price elastic.

Reason- Cars in general after les price elastic then Ford car. This is beacuse cars have less substitutes than Ford car.

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