Define a price ceiling and how it affects resource allocation in a market. Give a real...

Define a price ceiling and how it affects resource allocation in a market. Give a real world example of a price ceiling.

Expert Solution

Price ceiling

A price ceiling is the maximum price imposed by government or any other authority on a good or service above which any seller could not charge any price to the consumers.

Price ceiling is generally imposed below the equilibrium price such that;

When price ceiling (Pc) is imposed below the equilibrium price level (P), as we can see the quantity demanded is more than the quantity supplied.

Qd > Qs

This means that there is excess demand in the market, i.e there is shortage of resources in the market.

A real world example of price ceiling can be price ceiling imposed on gasoline after shart increase in prices of oil. A maximum amount of gasoline price is set by government or other authority to control the rising prices. As price ceiling was imposed, it resulted in shortage in the economy as quantity demanded exceeded the quantity supplied. This step was taken to discourage the oil companies to maintain the production needed to face the interruptions in oil supply from Middle east.

Rahul Sunny answered 1 year ago

Define a price floor and how it affects resource allocation in a market. Give a real...

Define a price floor and how it affects resource allocation in a market. Give a real world example of a price floor.

What is a price ceiling? Give and describe an example of a price ceiling in real...

What is a price ceiling? Give and describe an example of a price ceiling in real world applications.

Define price ceiling and price floor and give an example of each. Which leads to a...

Define price ceiling and price floor and give an example of each. Which leads to a shortage? Which leads to a surplus? Why?

define the efficient allocation of pollution and market allocation. give examples of efficient policies.

1. Define the concept of optimal resource allocation. a. How does mainstream economic theory define the...

1. Define the concept of optimal resource allocation. a. How does mainstream economic theory define the optimal allocation of resources in a society? b. Why would ecological economists argue that the mainline economic view of optimal resource allocation is not optimal but leads instead to societies making suboptimal decisions about how to allocate their resources. suggests that markets fail and policy must therefore correct the failures of the market.

Define and give examples of how medical and social utility are used in the micro allocation...

Define and give examples of how medical and social utility are used in the micro allocation of scarce resources

1. Monopoly price compared to the price of a competitive firm 2. Efficiency of resource allocation...

1. Monopoly price compared to the price of a competitive firm 2. Efficiency of resource allocation 3. Monopoly and its impact on large-scale production and unit cost of production

When a price ceiling causes an inefficient allocation to consumers, this means that everyone who wants...

When a price ceiling causes an inefficient allocation to consumers, this means that everyone who wants the good can purchase it. TRUE FALSE The marginal physical productivity of labor (MPP) is inversely correlated with marginal cost (MC). TRUE FALSE A market in equilibrium cannot capture any more gains from trade. TRUE FALSE Comparing the utility that one person receives from the consumption of a good to the utility of another person consuming a good is one way to...

Define the deadweight loss. Why does a price ceiling usually result in a deadweight loss? How...

Define the deadweight loss. Why does a price ceiling usually result in a deadweight loss? How can a price ceiling make consumers better off? Under what conditions might it make them worse off?

“Price ceiling is the maximum legal price that can be charged in a market ”. Explain...

“Price ceiling is the maximum legal price that can be charged in a market ”. Explain why a “price-ceiling policy” can reduce social welfare? Explain the implications the business?

Question