- In some cases, the government can intervene in the market when the equilibrium price is too high or low. For example, a price ceiling is a legal maximum price that can be charged in a particular market. Do some research on your own. Here are sites to use if needed:
a. What Happens to the Equilibrium Price When Quantity of Supply & demand Shifts Upward? Chirantan Basu, 2018. Retrieved from https://tinyurl.com/y8qz8v8o (https://smallbusiness.chron.com/happens-equilibrium-price-quantity-supply-demand-shifts-upward-36644.html)
b. Price ceilings and price floors: how does quantity demanded react to artificial constraints on process? Khan Academy. https://tinyurl.com/yaxj34ym (https://www.khanacademy.org/economics-finance-domain/ap-microeconomics/ap-supply-demand-equilibrium/ap-deadweight-loss-tutorial/a/price-ceilings-and-price-floors-cnx)
i. Is a price ceiling set above or below the market price?
ii. Give an example of a price ceiling and discuss some disadvantages and advantages of this type of government intervention.
- An art museum raises its admission price and ends up with a decrease in its total revenue. How could you explain this situation to the museum director?
- Suppose Billy drinks two cups of coffee a day no matter what the price. What does this mean in terms of supply and demand equilibrium?
- What are the main determinants of equilibrium of demand and supply? Which is likely to have more of an impact on supply and therefor market equilibrium: the demand for orange juice of the demand for a particular brand of orange juice?