Condering the following points listed below. Explain whether the price ceiling is a good option for the masks. Giving examples 1. It leads to a lower supply. If firms get a lower price, there may be less incentive to supply the good, and the number of masks available in the market declines. 2. A maximum price will also lead to a shortage – where demand will exceed supply. In a market where there is already a shortage due to demand exceeding supply, a further shortage will worsen the situation. 3. Black market - A maximum price can lead to the emergence of black markets as people try to overcome the shortage of masks and end up paying well above the market price.
Condering the following points listed below. Explain whether the price ceiling is a good option for the masks. Giving examples 1. It leads to a lower supply. If firms get a lower price, there may be less incentive to supply the good, and the number of masks available in the market declines. 2. A maximum price will also lead to a shortage – where demand will exceed supply. In a market where there is already a shortage due to demand exceeding supply, a further shortage will worsen the situation. 3. Black market - A maximum price can lead to the emergence of black markets as people try to overcome the shortage of masks and end up paying well above the market price.
Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter4: The Market Forces Of Supply And Demand
Section: Chapter Questions
Problem 8PA
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Condering the following points listed below. Explain whether the
1. It leads to a lower supply. If firms get a lower price, there may be less incentive to supply the good, and the number of masks available in the market declines.
2. A maximum price will also lead to a shortage – where demand will exceed supply. In a market where there is already a shortage due to demand exceeding supply, a further shortage will worsen the situation.
3. Black market - A maximum price can lead to the emergence of black markets as people try to overcome the shortage of masks and end up paying well above the market price.
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