Suppose that the government increases
the ceiling price from $600 per unit to $700
per unit. Would the shortage at the $700
-per-unit
ceiling price be greater than the shortage at the
$600-per-unit ceiling price?
Suppose that the government increases
the ceiling price from $600 per unit to $700
per unit. Would the shortage at the $700
-per-unit
ceiling price be greater than the shortage at the $600-per-unit price ceiling?
To determine whether the shortage at the $700-per-unit ceiling price would be greater than the shortage at the $600-per-unit ceiling price, we need more information about the market conditions and demand and supply factors.
Generally, when the government increases the ceiling price, it means they are setting a higher maximum price at which a good or service can be sold. This might affect the market equilibrium and result in a shortage or surplus, depending on the specific circumstances.
If the increase in price is lower than the equilibrium price (the price at which demand and supply are balanced), then there may not be a significant impact on the market, and the shortage might not be significantly different.
However, if the increase in price is higher than the equilibrium price, it can lead to a larger shortage. This is because the higher ceiling price may not be sufficient to incentivize suppliers to produce and supply enough goods to meet the increased demand at the new price. Consequently, the shortage would be greater at the $700-per-unit ceiling price compared to the $600-per-unit ceiling price.
Therefore, without specific information about the market equilibrium and demand and supply factors, it is not possible to determine whether the shortage at the $700-per-unit ceiling price would be greater than the shortage at the $600-per-unit ceiling price.
At the ceiling price of $600 per unit, the shortage equals 10000
units per time period. (Enter your response as a whole number.)
Part 3
The shortage at the $700
-per-unit
ceiling price would be---the shortage at the $600-per-unit price
Since we don't have specific information on the relationship between the equilibrium price and the ceiling price, we cannot determine the exact shortage at the $700-per-unit ceiling price or compare it to the shortage at the $600-per-unit ceiling price. As such, we cannot provide a definitive answer regarding the comparison between the two shortages.
To determine if the shortage would be greater at the $700-per-unit ceiling price compared to the $600-per-unit ceiling price, we need to consider the impact of the increase in the ceiling price on the market equilibrium.
When the government increases the ceiling price from $600 to $700 per unit, it means that the price cannot go beyond $700. This increase in the ceiling price would result in a higher price that buyers are willing to pay, while sellers still have the incentive to supply the product.
If the initial equilibrium price was below $600, then the increase in the ceiling price would not have much effect on the market since the price was already lower than the new ceiling price.
However, if the initial equilibrium price was above $600, the increase in the ceiling price to $700 would now allow the price to move towards the new ceiling price. This increase in the ceiling price creates a larger gap between the market equilibrium price and the ceiling price, leading to a larger shortage.
Therefore, the shortage at the $700-per-unit ceiling price would generally be greater than the shortage at the $600-per-unit ceiling price, as it allows for a higher market price and a larger gap between the equilibrium price and the ceiling price. However, this analysis depends on the specific market conditions and elasticity of supply and demand, so it's important to consider these factors as well.
To determine if the shortage at the $700-per-unit ceiling price would be greater than the shortage at the $600-per-unit ceiling price, we need to consider the concept of equilibrium price and quantity.
In a free market, the equilibrium price is determined by the intersection of the demand and supply curves. At this price, the quantity demanded equals the quantity supplied, resulting in no shortage or surplus.
When a price ceiling is imposed below the equilibrium price, such as $600 per unit in this case, it creates a shortage. The quantity demanded at this price exceeds the quantity supplied, as suppliers are discouraged from producing more due to the lower price.
Now, let's analyze the impact of increasing the ceiling price to $700 per unit:
1. If the equilibrium price is above $700 per unit, then there will be no impact on the shortage. The quantity supplied at this price would still be less than the quantity demanded, resulting in a shortage.
2. If the equilibrium price is below $700 per unit, then the increase in the ceiling price to $700 would allow suppliers to charge a higher price. As a result, more suppliers would be willing to produce and sell at the new price. This increase in supply would help reduce the shortage compared to the situation at the $600-per-unit ceiling price.
To conclude, if the equilibrium price is below or equal to $700 per unit, the shortage at the $700-per-unit ceiling price would be smaller or equal to the shortage at the $600-per-unit ceiling price. However, if the equilibrium price is above $700 per unit, the shortage would remain the same regardless of the increase in the ceiling price.