Question

In: Economics

Not enough or too much; it's a delicate balance. In this activity, you will select a...

Not enough or too much; it's a delicate balance. In this activity, you will select a country and explore the concepts of price ceiling and price floors and market shortages and surpluses.

Locate a recent article (published within the last year) that discusses either the price ceiling or price floor, and market shortages and surpluses of a good or service from your selected country at a macro level. You can use the Hunt Library, newspapers, new stations, or other credible sources to locate an article. Analyze your selected country's good or service and determine whether it has a market shortage or surplus. Include the following in your discussion.

  • Identify the country and the good or service selected.
  • Analyze supply and demand curves.
  • Examine the concepts of price ceilings and price floors.
  • Explain the causes and predict the effect of changes in demand and supply on the equilibrium price and quantity.
  • Differentiate between consumer surplus and producer surplus.
  • Discuss whether your selected good or service results in a market surplus or market shortage and explain why.

Summarize your findings using at least 250 words and provide a minimum of one reference. Use current APA formatting to document your sources.

Solutions

Expert Solution

My article is --Government to lower price ceilings for domestic airfares . By Riza Moidila Mufti .Dated May 14 ,2019.

My country is Indonesia and my good is airfare.

The government decided to lower the price ceilings for domestic.economic class airfares by 12 to 16% of both low cost carriers and full service airlines .Price ceiling which is below the equilibrium price will cause demand to rise and supply to fall which creates a shortage.Price floor which is set above the equilibrium price , will cause more quantity to be supplied and less quantity to be demanded . This causes a surplus as supply is more and demand is less.

Demand and supply changes with respect to price. Demand is inversely related to price and supply is positively realted to price .When price rises ,other things remaining unchanged, demand falls and vice versa . Again when price rises , other things remaining constant ,supply increases and vice versa.An increase in demand and decrease in supply will cause an increase in equilibrium price and  the equilibrium quantity will remain same .Likewise a decrease in demand and increase in supply will cause fall in price but equilibrium quantity will remain same.

Producers surplus is defined as the difference between the amount the producer is willing to supply and the actual amount received by him when the trade is made.Consumers surplus is defined as the difference between the price the consumers pay and the price they are wiling to pay.

Price ceiling will result in shortage of airfare as demnad is more and supply is less.

Reference-How changes in supply and demand affect market equilibrium . study .com


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