Question

1. Explain how an effective (binding) price ceiling can incur costs and benefits for an economy

2. How might the market imbalances caused by an anti-price gouging law be dealt with

3.What are the costs and benefits of a minimum wage?

4.true or false If a price floor is effective, all suppliers benefit from equilibrium prices below the free market prices.

Answer 1

1 - The effective price ceiling takes place below the equilibrium price . Now , in this the price of the products cannot rise above the certain level which is decided by the government.

Hence the benefit takes place for the consumer. Due to the lower price , the consumers can buy more. The consumer suplus increases. The demand in the economy increases because the ceiling takes place below the equilibrium price.

The cost for the economy is the loss of the producers. At the lower price , the supply decreases. Also the sales price is also reduced due to price ceiling. Thus there is reduction in the producer surplus and this is the cost of price ceiling.