In the wake of $4/gallon gas prices last year, some people were calling on the government to restrict gasoline prices. Do you believe the government should have put a cap on gasoline prices?
Suppose the equilibrium price of a gallon of gas is $4 but the government has imposed a price ceiling of $3.50. As a result of the price ceiling,
A) People will be happy because they will be able to obtain all the gas they want at a cheaper price.
B) There will be a persistent shortage of gasoline.
C) Suppliers will increase delivery of gas to meet the new demand.
D) Both A and C.
NOTE: In the next set of questions, the first question asks students to draw the supply and demand graph, which they must use in the follow-up clicker question. See Hoyt, et al, 2012 for discussion of this approach.
Assume the equilibrium price of one-bedroom apartments is $800 and this results in an equilibrium quantity of 80,000. Use a supply and demand diagram to show the impact if the government imposes a minimum price of $1200 per apartment.
As a result of this price floor,
A) the demand curve for apartments shifts to the right.
B) the supply curve for apartments shifts to the left.
C) the quantity demanded of apartments decreases and the quantity supplied of apartments increases.
D) the number of apartments rented will increase.