After Hurricane Andrew hit Florida and Louisiana, consumers expressed outrage at the high prices being charged for chainsaws, generators, and bottled water. If governments followed the consumers' demands and imposed price ceilings in these markets, what is the likely result?
Effective price ceilings (i.e., price ceilings set below the equilibrium price) will cause a chronic shortage of the goods, leading to black markets, greater profits for illicit suppliers, and (probably) higher prices than would exist in a free market. Additionally, the quantities supplied of these goods will be lower than in a free market, making people worse off than they otherwise would be.
You might also like to view...
Exhibit 21-4 Coffee and tea output (pounds per hour) CountryCoffee Tea Brazil10 5 China 8 8 As shown in Exhibit 21-4, compared to Brazil, China has a comparative advantage in the production of:
A. coffee. B. tea. C. both coffee and tea. D. neither coffee nor tea.
The amount of money in the United States is determined by:
A. the combined behavior of commercial banks and the public. B. the public C. the combined behavior of commercial banks and the public, as well as actions of the Federal Reserve. D. the Federal Reserve.
Which of the following is most likely to be a monopolistically competitive firm?
A. local Internet provider B. college textbook publisher C. wheat farmer D. computer app maker
If the price elasticity of demand is less than 1, then consumer demand is
A) unrelated to the elasticity of demand. B) inelastic. C) elastic. D) unitary elastic.