"Price Ceilings, Floors, and Market Efficiency"

Scenario Analysis:

The government sets a price ceiling below the equilibrium price for rental housing.

The government sets a price floor above the equilibrium price for agricultural products.

1. Questions:

• Explain how each policy affects the equilibrium price and quantity.
• Identify if there will be a shortage or surplus in each scenario and explain why.
• Discuss potential real-world consequences of each policy, such as long wait times for rental housing or unsold agricultural products.

2. Discusssion:

How can price controls lead to unintended consequences that policymakers did not foresee?

3. Graph Analysis:

Draw a graph showing a tax on sellers:

• Label the supply and demand shifts due to the tax
• Calculate the new equilibrium price and quantity.
• Discuss who bears the greater tax burden and why.

4. Using a hypothetical market with given prices and willingness-to-pay,
   
   
   • Calculate consumer surplus if the price is set at a certain level.
   
   
   • Calculate producer surplus for the same market.

Discussion: How do changes in price affect consumer and producer surplus?

5. Using examples from Chapter 6, answer the following:
   
   
   • What are the economic arguments for and against rent control?
   
   
   • Discuss how a minimum wage can impact unemployment according to the chapters
   
   
   • Calculate the effects of a price ceiling if the equilibrium price for a product is $10, but the government sets the price at $7. Assume demand exceeds supply at $7.
6. Refer to Chapter 7 to complete this task:

• Calculate consumer surplus given a demand curve with values at different price
• For a market where the supply curve is linear, and costs are given, calculate the producer surplus at an equilibrium price.
• Explain in your own words why economists consider free markets to maximize social