Using specific numbers from the graph, explain what would happen in
this market if a new minimum price of $15 was instituted by the United
States Government. Be sure to include information identifying if this is a
ceiling or a floor, and the exact amount of shortage or surplus that would
result. (5 points) Given this shortage or surplus, explain why the
government would still choose to implement this policy (2 points), and
explain if you would support such a change. Give at least 2 reasons you
would or would not. (3 points)
If a new minimum price of $15 was instituted by the United States Government, this would create a price floor in the market. In the graph, at a price of $15, the quantity demanded is 60 units and the quantity supplied is 30 units. This results in a surplus of 30 units (60-30=30).
The government may choose to implement this policy in order to protect producers and workers in the industry by ensuring they receive a minimum price for their products. Additionally, the government may believe that setting a minimum price will help stabilize the market and prevent prices from dropping too low.
I would support this change for a few reasons. Firstly, it can help protect small producers and workers in the industry from exploitation and provide them with a fair wage. Secondly, it can help maintain the stability of the market and prevent prices from becoming too volatile, which can benefit both producers and consumers in the long run.
However, I would also consider the potential negative consequences of implementing a price floor. For example, it could lead to inefficiencies in the market and result in resources being allocated inefficiently. Additionally, it could potentially lead to a decrease in consumer surplus if prices are kept artificially high. Overall, I would support the policy if it effectively protects producers and workers while also considering the potential drawbacks.