Problem 7
Opponents of rent control cite comparisons of cities that regulate rents with cities that do not. Their evidence shows that there is more moderately priced housing available in cities that let the market set the rates for rent. What would account for the differences in availability?
Problem 7
A local supermarket decides to sell a premium brand of meats and cheeses in its deli department. This brand is priced about \(\$ 2\) more per pound than the store brand. About 80 percent of the space in the deli display cases is devoted to the premium brand and 20 percent to the store brand. a. How did price serve as an incentive to the supermarket? b. What kind of signals is the supermarket sending to its customers with this pricing strategy?
Problem 8
Suppose that the federal government decides to increase the excise tax on cellular phone services by 0.1 percent. Why will this action cause the equilibrium price of cellular phone services to rise?
Problem 8
The percentage of workers who were paid the minimum wage or less decreased from 6.5 percent in 1988 to 3 percent in 2002 to 2.7 percent in \(2004 .\) What does this trend tell you about the relationship of the minimum wage to the equilibrium wage for those kinds of work?
Problem 8
A candy company whose products sold in supermarkets for about \(\$ 3\) a bag decided to enter the growing gourmet chocolate market. It purchased two small companies that made premium chocolates that sold for much higher prices. How does this story reveal the way the price system works as an incentive for producers while allocating resources efficiently?
Problem 9
A large discount store has built its reputation on offering consumers low prices. However, its customers come from many different income levels. Recently, the store began offering higher priced jewelry and consumer electronics products. What signal might this send to producers of other premium products who have never sold in discount stores before?
Problem 9
In the wake of sharply rising gasoline prices in the summer of \(2005,\) several states considered putting a ceiling on the wholesale price of gasoline. What would be the likely result of such a price control? Would it be an effective strategy for lowering gas prices?
Problem 10
Many states have laws against so-called price gouging. These laws make it illegal to sell goods and services at levels significantly above established market prices following a natural disaster. What economic argument might be used against such laws?
