Use exhibit below to answer questions a d 8 points a choose...

Use exhibit below to answer questions a-d: (8 points) a) Choose a price that would be considered "price ceiling" b) Offer a reasons why some economists may disagree with imposing a price ceiling on product x. c) What is consumer surplus at 200th unit of output. d) Give an example of a good or a service that can rationalize imposition of a price floor on. Market for product S 1200 1100 1000 NOO MO 700 ) Price (5) 1 000 - 500 400 300 200 D 100 100 400 500 800 200 Quantity

Transcript

00:01 Let's go over this question.

00:05 We have our market equilibrium where the two intersect.

00:20 The price is $600, the quantity is $300.

00:27 We're going to choose a binding price ceiling on this market.

00:31 Our price ceiling is a maximum price that we can charge.

00:36 The price ceiling is going to be underneath our equilibrium price.

00:41 We could choose, for example, $300.

00:48 Describe two long run disadvantages.

00:56 Price ceilings can make things more affordable, but they have long term disadvantages.

01:02 One of them would be shortages.

01:04 You could see that at this price, the quantity demanded is greater than the quantity supplied, resulting in a shortage.

01:15 Another one could be lower quality products.

01:18 This makes sense because if the suppliers are not getting as much money for supplying this product, they will have to cut costs somehow.

01:28 We're going to apply this to a real life scenario.

01:30 For example, people often complain that rent is too expensive.

01:34 However, if the government were to impose a price ceiling on the rental market, it's possible that the people supplying apartments would have to cut costs and therefore the apartment quality would go down.

01:51 What is producer surplus at 1000th unit of output? at the quantity is equal to 100, we're asked to find the producer surplus.

02:16 The producer surplus is the area above the supply curve.

02:21 At this output, we see that we are now asked to find the area of the trapezoid instead of the triangle...

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