Question

20. In 1989, Hurricane Hugo devastated Charleston, South Carolina, leaving residents with no electricity for light or refrigeration, and completely cut off from the outside world by fallen trees and washed-out roads. Consequently, the price of ice rose 1,000 percent and generators 300 percent. Tree removal firms were charging $4,000 to cut up a single tree. Outraged, the city government enacted an emergency law prohibiting price "gouging." This law is an example of a. The cost of disaster services. b. A price ceiling. c. Increasing opportunity cost d. A price floor. 21. If both the supply and demand curves shift to the left, then we can conclude that there will be a. an increase in the equilibrium quantity sold. b. a decrease in the equilibrium quantity sold. c. an increase in the equilibrium price. d. a decrease in the equilibrium price.

Answer 1

Q20- Answer is B

price ceiling is the maximum price that could be charged for any service or good. So it is case of price ceiling.

Q21- Answer is B.

There must be decrease in quantity sold but price of good will depend on how much the supply and demand curves shifted relatively. If shift in demand curve is higher then shift in supply then price will decline and if shift in supply is larger then demand then price will increase and if both curves shifted with same magnitude then there will be no change in price but quantity in all three cases will definitely fall.

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