Module 8

Question 1

price controls

Answer 1

legal restrictions on how high or low a market price may go

Question 2

price cieling

Answer 2

upper limit on what producers can charge

Question 3

price floor

Answer 3

lower limit on what producers can charge

Question 4

inefficient allocation of consumers

Answer 4

people who want the good badly and are willing to pay a high price dont get it, while those who care relatively little about the good and are only willing to pay a relatively low price to get it
consequence of price ceilings

Question 5

inefficiently low quality

Answer 5

sellers offer low quality goods at low prices even though the buyers would prefer a higher quality at a higher price
consequence of price ceiling

Question 6

Inefficient allocation of sales among sellers

Answer 6

those who are willing to sell the good at the lowest price are not always those who manage to sell it
consequence of price floors

Question 7

inefficiently high quality

Answer 7

sellers offer high quality goods at a high price, even though buyers would prefer lower quality and lower price
consequence of price floors

Question 8

effective price ceiling

Answer 8

when the price ceiling is below equilibrium, causing a shortage

Question 9

effective price floor

Answer 9

when the price ceiling is above the equilibrium, causing a surplus