Chapter 4: Q. 4.4 (page 75)
Explain the effects of price ceilings
Imposing a maximum price below the equilibrium leads to shortages.
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The table below illustrates the demand and supply
schedules for seats on air flights between two cities:
What are the market price and equilibrium quantity in this market? Now suppose that federal
authorities limit the number of flights between the two cities to ensure that no more than 1,200 passengers can be flown. Evaluate the effects of this quota if price adjusts. (Hint: What price per
flight are the 1,200 passengers willing to pay?)
In 2016,the government ofanation establisheda
price support for wheat.The government's sup
port price has been above the equilibrium price
each year since,and the government has pur
chased all wheat over and above the amounts that
consumers have bought at the support price.
Every year since 2016,there has been an increase
in the number of wheat producers in the market.
No other factors affecting the market for wheat
have changed.Predict what has happened every
year since 2016,to each of the following:
a.Amount of wheat supplied by wheat producers
b.Amount of wheat demanded by all wheat con
sumers
c.Amount of wheat purchased by the government
In advance of the recent increase in the U.S.
minimum wage rate,the government of the state
of Arizona decided to boost its own minimum
wage by an additional$1.60 per hour.This
pushed the wage rate earned by Arizona teenag
ers above the equilibrium wage rate in the teen
labor market.What is the predicted effect of this
action by Arizona's government on each of the
following?
a.The quantity of labor supplied by Arizona
teenagers
b.The quantity of labor demanded by employers
of Arizona teenagers
c.The number of unemployed Arizona teenagers
Consider the information in Problem 4-9 and your
answers to that question.Suppose that the market
clearing price of Pakistani wheat in the absence of
price supports is equal to$0.10 per kilogram.At
this price,the quantity of wheat demanded is 12
billion kilograms.Under the government wheat
price-support program,how much more is spent
each year on wheat harvested in Pakistan than oth
erwise would have been spent in an unregulated
market for Pakistani wheat?
How do you suppose that when soft drink sellers introduced cans containing 7.5 ounces of soft drink to sell alongside traditional 12-ounce cans, they managed to offer the soft drinks in the smaller cans at prices that were several cents higher per ounce of soft drink?
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