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Chapter 4: Q.12 (page 104)

Select the correct answer. A price ceiling will usually shift:

a. demand

b. supply

c. both

d. neither

Short Answer

Expert verified

Neither

Step by step solution

01

Step.1 Introduction

A price ceiling is an upper limit imposed on the price of product by the government to protect the consumers in the market. Sellers cannot charge a price higher than the limit.

02

Step.2 Explanation

There is no shift in the demand or supply curve because of the price ceiling. However, a binding price ceiling would cause a movement on the same curves and would create a shortage when quantity demanded is greater than the quantity supplied.

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Most popular questions from this chapter

Predict how each of the following economic changes will affect the equilibrium price and quantity in the financial market for home loans. Sketch a demand and supply diagram to support your answers.

a. The number of people at the most common ages for home-buying increases.

b. People gain confidence that the economy is growing and that their jobs are secure.

c. Banks that have made home loans find that a larger number of people than they expected are not repaying those loans. d. Because of a threat of a war, people become uncertain about their economic future.

e. The overall level of saving in the economy diminishes.

f. The federal government changes its bank regulations in a way that makes it cheaper and easier for banks to make home loans.

Identify the most accurate statement.

A price floor will have the largest effect if it is set:

a. substantially above the equilibrium price. b. slightly above the equilibrium price.

c. slightly below the equilibrium price.

d. substantially below the equilibrium price.

Sketch all four of these possibilities on a demand and supply diagram to illustrate your answer

Which of the following changes in the financial market will lead to an increase in the quantity of loans made and received: a. a rise in demand b. a fall in demand c. a rise in supply d. a fall in supply

Predict how each of the following economic changes will affect the equilibrium price and quantity in the financial market for home loans. Sketch a demand and supply diagram to support your answers.

  1. The number of people at the most common ages for home-buying increases.
  2. People gain confidence that the economy is growing and that their jobs are secure.
  3. Banks that have made home loans find that a larger number of people than they expected are not repaying those loans.
  4. Because of a threat of a war, people become uncertain about their economic future.
  5. The overall level of saving in the economy diminishes.
  6. The federal government changes its bank regulations in a way that makes it cheaper and easier for banks to make home loans.

Identify each of the following as involving either demand or supply. Draw a circular flow diagram and label the flows A through F. (Some choices can be on both sides of the goods market.)

a. Households in the labor market

b. Firms in the goods market

c. Firms in the financial market

d. Households in the goods market

e. Firms in the labor market

f. Households in the financial market
See all solutions

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