In April 2007, there were shortages of Ghacem cement in the country which led to a rise in the price of Ghacem cement. The govermment then intended to put a price ceiling on cement in the country to minimize the loss to users of cement for construction purposes. Some people were of the view that the fxing of a price ceiling for cement in the country will not have any effect". Briefly discuss with the aid of an appropriate diagram the effect of the imposition of price ceiling on Ghacem cement market. After the imposition of the price ceiling (and initial market equilibr ium), two events took place in the cement market. First, Ghacem Company Limited obtained an efficient technology of production which influenced supply of Ghacem cement. This was folowe d by the second event (after a year) where the prices of raw materials for Ghacem cement production increased. An economist trained 'in the University of Professional Studies, Accra is of the view that, the final equilibrium price, after the effect of the second event has been felt, can only be lower than the initial equilibrium price (that is when the two events have not occurred). Another economist trained in the University of Ghana, however on the other hand thinks the final equilibrium price can only be higher than the initial equilibrium price. By using appropriate diagram(s) briefly explain who is right. If none of the two economists is right, what is your view?
In April 2007, there were shortages of Ghacem cement in the country which led to a rise in the price of Ghacem cement. The govermment then intended to put a price ceiling on cement in the country to minimize the loss to users of cement for construction purposes. Some people were of the view that the fxing of a price ceiling for cement in the country will not have any effect". Briefly discuss with the aid of an appropriate diagram the effect of the imposition of price ceiling on Ghacem cement market. After the imposition of the price ceiling (and initial market equilibr ium), two events took place in the cement market. First, Ghacem Company Limited obtained an efficient technology of production which influenced supply of Ghacem cement. This was folowe d by the second event (after a year) where the prices of raw materials for Ghacem cement production increased. An economist trained 'in the University of Professional Studies, Accra is of the view that, the final equilibrium price, after the effect of the second event has been felt, can only be lower than the initial equilibrium price (that is when the two events have not occurred). Another economist trained in the University of Ghana, however on the other hand thinks the final equilibrium price can only be higher than the initial equilibrium price. By using appropriate diagram(s) briefly explain who is right. If none of the two economists is right, what is your view?
Chapter4: Markets In Action
Section: Chapter Questions
Problem 1SQP
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Transcribed Image Text:In April 2007, there were shortages of Ghacem cement in the country which led to a rise
in the price of Ghacem cement. The govermment then intended to put a price ceiling on
cement in the country to minimize the loss to users of cement for construction purposes.
Some people were of the view that the fxing of a price ceiling for cement in the country
will not have any effect". Briefly discuss with the aid of an appropriate diagram the effect
of the imposition of price ceiling on Ghacem cement market.
After the imposition of the price ceiling (and initial market equilibr ium), two events took
place in the cement market. First, Ghacem Company Limited obtained an efficient
technology of production which influenced supply of Ghacem cement. This was folowe d
by the second event (after a year) where the prices of raw materials for Ghacem cement
production increased. An economist trained 'in the University of Professional Studies,
Accra is of the view that, the final equilibrium price, after the effect of the second event
has been felt, can only be lower than the initial equilibrium price (that is when the two
events have not occurred). Another economist trained in the University of Ghana, however
on the other hand thinks the final equilibrium price can only be higher than the initial
equilibrium price. By using appropriate diagram(s) briefly explain who is right. If none of
the two economists is right, what is your view?
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