ECONOMICS
PRICE CEILINGS AND FLOORS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Government intervened to prevent lines
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Government intervened to enact gasoline rations
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There was no price control on gasoline at the time
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None of the above
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Detailed explanation-1: -When a price ceiling is set below the equilibrium price, quantity demanded will exceed quantity supplied, and excess demand or shortages will result. Price floors prevent a price from falling below a certain level.
Detailed explanation-2: -How do unregulated markets cure a “labor shortage” when there are no immigrants to boost the labor supply? Solution: • Unregulated markets cure a labor shortage by pushing up the wage.
Detailed explanation-3: -If the price is too high to clear the market, we mean that the quantity supplied is higher than the quantity demanded. This is so because at higher prices, suppliers supply more. So, there is excess quantity supplied. On the other hand, at higher prices, consumers demand less in the market.
Detailed explanation-4: -If a government decides to make health insurances affordable by requiring all health insurance companies to cut their prices by 30%, what will probably happen to the number of people covered by health insurance? This will create shortage in health insurance, and fewer people will be covered.