Chapter 3: Q 27. (page 78)
Does a price ceiling attempt to make a price higher or lower?
Price ceiling attempts to make a price lower.
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Many changes are affecting the market for oil. Predict how each of the following events will affect the equilibrium price and quantity in the market for oil. In each case, state how the event will affect the supply and demand diagram. Create a sketch of the diagram if necessary.
a. Cars are becoming more fuel efficient, and therefore get more miles to the gallon.
b. The winter is exceptionally cold.
c. A major discovery of new oil is made off the coast of Norway.
d. The economies of some major oil-using nations, like Japan, slow down.
e. A war in the Middle East disrupts oil-pumping schedules.
f. Landlords install additional insulation in buildings.
g. The price of solar energy falls dramatically.
h. Chemical companies invent a new, popular kind of plastic made from oil
What does a downward-sloping demand curve mean about how buyers in a market will react to a higher
price?
Explain why the following statement is false: “In the goods market, no buyer would be willing to pay more than the equilibrium price.”
What is deadweight loss?
How does a price ceiling set below the equilibrium level affect quantity demanded and quantity supplied?
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