Consumers understandably like lower prices, but they should understand there is a great...
Question:
Consumers understandably like lower prices, but they should understand there is a great difference between a lower price produced by government price ceiling and a lower price that comes about through normal market channels, one benefits the consumer, the other may not.
a. This statement is not true. Consumers are benefited when the government lowers the price and the consumers are benefited when businesses lower the price.
b. This is because when the government forces prices down, there is a shortage and reduction in total surplus. Lower prices through markets do not create shortage but they do benefit consumers.
c. This is because the government forces prices down, there is a surplus and reduction in total surplus. Lower prices through markets do not create surpluses but they do benefit consumers.
d. This is because when markets force the prices down, there is a shortage and reduction in total surplus. Lower prices through government actions do not create shortages but they do benefit consumers.
e. None of the above
Customers:
Individuals who purchase to satisfy a need or demand is said to be a customer. Customers make a purchase decision before making an actual purchase to ensure that maximum satisfaction is derived from the purchased product. consumers have unique preferences.
Answer and Explanation: 1
Become a Study.com member to unlock this answer! Create your account
View this answerThe correct answer is A) This statement is not true. Consumers are benefited when the government lowers the price and the consumers are benefited when...
See full answer below.
Ask a question
Our experts can answer your tough homework and study questions.
Ask a question Ask a questionSearch Answers
Learn more about this topic:
Get access to this video and our entire Q&A library
Price Ceiling in Economics: Definition, Effects & Examples
from
Chapter 3 / Lesson 67
24K
Learn the price ceiling definition in economics. See a price ceiling example to compare the difference between a price ceiling vs price floor.
Related to this Question
- The difference between the price consumers are willing to pay and the price that they actually pay is known as: A) price discrimination. B) government surplus. C) producer surplus. D) consumer surplus
- Consumer surplus: a. is the difference between the maximum prices consumers are willing to pay for a product and the lower equilibrium price b. is the difference between the maximum prices consumers a
- If a price ceiling is set at $10, and the equilibrium market price is $8, which price will consumers actually pay? a. $10 b. $8 c. $18 d. $2
- When a competitive equilibrium is achieved in a market: A. all individuals are better off than they would be if a price ceiling or price floor were imposed by government. B. economic surplus equals the deadweight loss. C. the total benefits to consumers
- When the government controls the price of a product, causing the market price to be above the free market equilibrium price, A. all producers gain. B. both producers and consumers gain. C. only consumers gain. D. some, but not all, sellers can find buyers
- If a price ceiling is set at $10 and the equilibrium market price is $8, what price will consumers actually pay? a. $10 b. $8 c. $18 d. $2
- Demand price is defined as 1. Lowest price consumers are willing to pay 2. Highest price consumers are willing to pay 3. The equilibrium price 4. The market price
- A price ceiling can often be viewed as: a. the government setting price above market equilibrium price. b. an implicit tax on producers and an implicit subsidy to consumers. c. the government setting price below market equilibrium price. d. Both b and c.
- If the price of a good starts out above the equilibrium price, then: (check all that apply) a. Consumers will lose welfare due to lower consumption b. Consumers will compete to bid the price down c. S
- The government believes the equilibrium price of $100 is too high. The government thus imposes a ceiling price of $40. (a) Based on this, what happens to the number of bouquets sold? (b) What happens to the out-of-pocket price that consumers pay? (c)
- The substitution bias in the consumer price index occurs because: A. The consumer price index counts only price increases and ignores any price decrease. B. The consumer price index includes the prices of every good and service when in fact consumers do n
- Consumer surplus measures the value between the price consumers are willing to pay and the: a. producer surplus price. b. deadweight gain price. c. preference price. d. actual price paid.
- Consumer surplus measures the value between the price consumers are willing to pay and which of the following? a. producer surplus price b. deadweight gain price c. actual price paid d. preference price
- Producer surplus: a. is the difference between the maximum price consumers are willing to pay for a product and the lower equilibrium price. b. rises as the equilibrium price falls. c. is the difference between the maximum price consumers are willing t
- Consumer surplus measures the value between the price consumers are willing to pay and the: a. producer surplus price. b. deadweight gain price. c. actual price paid. d. preference price.
- If the government imposes a price ceiling on a good that is below the market equilibrium price, A. a surplus will develop. B. a shortage will develop. C. producers will reduce their sales price. D. consumers will reduce their demand for the good.
- Considering the demand side of a market for a good, the consumer surplus derived by an individual: i. is the difference between the maximum amount the consumer is willing to pay for each unit and the price he/she actually pays.
- "When producers reduce prices for goods and services, it increases consumers' surplus and everyone's standard of living. Therefore, it behooves the government to impose below-market price ceilings on consumer goods, thereby increasing consumers surplus an
- If a demand curve goes through the point P = $6 and Q_d= 400, then: a. 400 units are the most consumers will buy if price is $6, b. $6 is the lowest price consumers can be charged to induce them to buy 400 units, c. $6 is the highest price consumers wil
- At market equilibrium price: a. firms produce a quantity that consumers are willing and able to buy at that price. b. consumers are willing to buy more of the good at a higher price. c. the market has signals to lower the price. d. all firms are making ec
- A consumer 's tastes are represented by U = cb, with MU_b = c and MU_c = b. There is a move from prices p_b = 2 and p_c = 2 to prices p_b' = 4 and p_c' = 4. The income is I = 20. Show the consumer's initial optimal consumption bundle and new optimal consu
- Consumer surplus: a. is the difference between the maximum prices consumers are willing to pay for a product and the minimum prices producers are willing to accept. b. rises as equilibrium rises. c. is the difference between the minimum prices producers a
- If the government imposes a price ceiling that is lower than the market clearing price, then A. both consumer surplus and producer surplus will increase. B. both consumer surplus and producer surplus will decrease. C. consumer surplus will decrease while
- A consumer's bundle includes two normal goods, good X and good Y. According to the income effect, an [{Blank}] in the price of good X or [{Blank}] in the price of good Y will cause the consumer to buy less of good X. A. decrease; increase. B. increase;
- Consider a market featuring a conventional upward sloping supply curve and a downward sloping demand curve where consumers and firms are all price takers. If a subsidy is introduced, then which of the following statements is true? a. Consumer and producer
- Consumer surplus is the difference between the: a) Market price and the minimum price required to induce production. b) Maximum willingness to pay of consumers and the market price. c) Quantity demanded and the quantity supplied at the market price. d) Fu
- Which of the following is true about binding price ceilings? (a) A binding price ceiling makes all producers worse off, makes some consumers worse off, and makes some consumers better off. (b) A binding price ceiling makes all consumers and producers be
- A shift in the consumer's demand for a good X cannot result from a change in the: A) price of a substitute for good X. B) price of X. C) consumer's taste. D) consumer's income.
- Consider a market where supply and demand are given by: Qs/x = -16 + Px (Supply curve) Qd/x = 92 - 2Px (Demand curve) Suppose that the government imposes a price floor of $40 and agrees to purchase any and all units consumers do not buy at the floor price
- If consumer income increases, then a. the quantity demanded at any price will decrease. b. the marginal utility of normal products will increase. c. consumers will move toward a new equilibrium in the quantities of products purchased. d. the demand fo
- Which one of the following would not occur if the market price was above the market-clearing price? a. Consumers would bid up the price b. Producers would want to produce and sell more than consumers
- Consider these two conditions for market demand: 1. In market 1, consumers are highly unresponsive to a change in the price of the good. 2. In market 2, consumers are highly responsive to a change in the price of the good. Assume now that the same dollar
- An elasticity value of 0.6 would be classified as: - price elastic, meaning that consumers are relatively sensitive to price. - price elastic, meaning that consumers are not relatively sensitive to price. - price inelastic, meaning that consumers are rela
- The consumer is said to be at a point of saturation when: A. Marginal utility of a commodity is greater than the price of the commodity. B. The extra amount of money a consumer is willing to pay for an additional consumption equates to the prices of each
- Suppose demand and supply are given by Qd = 60 - P and Qs = P - 20. If a price ceiling of $32 is imposed in the market, determine the full economic price paid by the consumers.
- If consumers find that there are substantial transaction costs to purchasing a product, then _____ A) Overall consumer demand is greater at each price. B) Overall consumer demand is the same at each
- The equilibrium price for a gallon of milk is $2, but the government has put a price ceiling of $2 on all gallon bottles of milk. What will be the effect of this price ceiling? A) Consumers benefit B
- Market demand is the: A) sum of the consumer surplus of each individual. B) difference between the market price and the maximum amount each individual is willing to pay for a good. C) sum of the prices that each individual is willing to pay for each quan
- A consumer has $300 to spend on goods X and Y. The market prices of these two goods are Px=$15 and Py=$5. a) What is the market rate of substitution between goods X and Y? b) Illustrate the consumer's
- If the price of a good decreases and the total expenditure for a consumer on that good increases, then: a. the consumer surplus attached to the good has increased. b. the consumer surplus attached to the good has decreased. c. the price elasticity of dema
- A price ceiling (a) does increase the amount of the product that consumers buy because it lowers the price. (b) does increase the amount of the product that consumers buy because it creates a surplus. (c) does not increase the amount of the product that c
- Consider a market where supply and demand are given by: QxS = -16 + Px (supply curve) QxD = 92 - 2Px (demand curve) Suppose that the government imposes a price floor of $40 and agrees to purchase any and all units consumers do not buy at the floor price o
- 1. When prices are (p_1, p_2) = (1, 2) a consumer demands (x_1, x_2) = (1, 2), and when prices are (q_1, q_2) = (2, 1) a consumer demands (y_1, y_2) = (2, 1). Is this behavior consistent with the model of maximizing behavior? 2. When prices are (p_1, p_2)
- The consumer price index overestimates inflation because it: a) Measures the cost of a market basket in the second year that has too many units of the most inflated items (ex: consumers switched to relatively less expensive goods), b) Allows consumers t
- A firm is said to be a price taker if it: a) Can affect the market price of goods by changing its supply, b) Sells as much of any good as it wants at the prevailing market price, c) Consults the government before fixing the price of its goods and services
- Suppose that a consumer consumes two goods x and y. The price of good x falls (and nothing else changes). After the price change, the consumer buys more of both goods.
- A firm cannot price discriminate if it: A. is regulated by the government B. has perfect information about consumer demand C. operates in a competitive market D. faces a downward-sloping demand curve
- When the price of a good rises, the resulting change in relative price causes the consumer to reduce his quantity demanded of that good, even when the consumer is income-compensated, so that he remains indifferent about the price change. This observation
- The demand curve is downward sloping because: a. Consumers are willing to buy more of the good only at lower prices. b. Producers are willing to supply more of the good only at lower prices. c. Pro
- Determine the effect upon equilibrium price and quantity sold if the following changes occur in a particular market: a. Consumers' income increases and the good is normal. b. The price of a subst
- Market demand is Qd =100 - P and market supply is Qs =4P. The government places a $2 per unit tax on consumers What is the price now paid by consumers? A. $19.60 B. $21.60 C. $17.60 D. $22.00 Mar
- In deriving the market demand curve for a commodity, we assume all of the following except: a. the prices of related commodities are held constant. b. the income of consumers is held constant. c. the tastes of consumers are held constant. d. the price of
- Which of the following would not cause market demand for a normal good to decline? a. An increase in the price of a complement b. An increase in the price of a substitute c. A decline in consumer income d. Consumer expectations that the good will go on
- The more time consumers have to adjust to a change in price: A. the smaller will be the price elasticity of demand. B. the greater will be the price elasticity of demand. C. the more likely the product is a normal good. D. the more likely the product is a
- Which of the following would not cause market demand for a normal good to decline? a. an increase in the price of a substitute b. an increase in the price of a complement c. a decline in consumer income d. consumer expectations that the good will go on sa
- Inflation is: a) Price levels that rise over 100% within a short period of time. b) Increase in price levels that result in lower prices passed onto consumers. c) An overall increase in price levels across the board. d) An increase in the prices of goods
- Consider a market where supply and demand are given by Q_X^s = -18 + P_X and Q_X^d = 78 - 2P_X. Suppose the government imposes a price floor of $36 and agrees to purchase and discard any and all units consumers do not buy at the floor price of $36 per uni
- The price elasticity of demand for a good measures the willingness of: a. consumers to buy less of the good as price rises. b. consumers to avoid monopolistic markets in favor of competitive markets. c. firms to produce more of a good as price rises. d
- Consider a market for a normal good Y in which the law of demand holds. The price of a complement falls at the same time as consumer income rises. In this case: A. price will rise, but the quantity sold in the new equilibrium could either increase or decr
- Consider the market for a normal good Y in which the law of demand holds. The price of a complement falls at the same time as consumer income rises. In this case: a. price will rise, but the quantity sold in the new equilibrium could either increase or de
- Market prices adjusted to consider differences between social cost-benefit and private cost-benefit calculations are: a. price distortions. b. consumer surplus. c. shadow prices. d. exchange rates.
- If the price in a market is below the equilibrium price, then A) consumers will push price up to eliminate the surplus. B) firms will push the price up to eliminate the surplus. C) consumers will push the price up to eliminate the shortage. D) firms will
- If a price ceiling is established then a. all consumers will benefit. b. the gains to consumers will exceed the losses to others. c. total surplus will fall d. producer surplus will rise e. the market will be efficient
- If a price ceiling is established then a. all consumers will benefit. b. the gains to consumers will exceed the losses to others. c. the total surplus will fall. d. producer surplus will rise. e. the market will be efficient.
- The difference between the highest price a consumer will pay and the actual market price is called {Blank} surplus; the difference between the actual market price and the lowest price a seller will accept is called {Blank} surplus.
- The price elasticity of demand tends to be higher for goods a. For which the consumer spends a high percentage of his or her income b. That are in scarce supply c. For which the consumer spends a low
- Consider a market where supply and demand are given by QXS = -18 + PX and QXd = 84 - 2PX. Suppose the government imposes a price floor of $39, and agrees to purchase any and all units consumers do not
- The price for a 27-inch TV is $450. At this price, consumers buy 1,000 of them. Suppose the price per TV rises to $550. Consumers now buy 600 of them. What is the price elasticity of demand in this range?
- A price ceiling is a government-mandated price set the equilibrium point and results in a market.
- If a market surplus exists: A. the only resolution is for the government to set the price. B. consumers will compete for the product by offering to pay more. C. producers will compete for customers by reducing prices. D. the equilibrium price is equal to
- Consider a consumer with utility function given by u(x_1, x_2) = x_1x_2. A) Find the demands for goods 1 and 2 when the consumer faces prices p_1 and p_2, and income m. B) Are goods 1 and 2 normal goo
- An increase in consumer incomes will: a. Increase the demand for an inferior good b. Increase the supply of an inferior good c. Increase the demand for a normal good d. Decrease the supply of a normal good
- If the aggregate price level rises, holding everything constant, consumers will: a. demand less aggregate output at all price levels, resulting in a right shift of the AD curve. b. find their purchasing power has increased and will purchase more goods and
- Can third-degree price discrimination be effective if the different groups of consumers have different levels of demand but the same price elasticities? If consumers have different levels of demand but the same price elasticities, then the firm's profits:
- Consumer surplus is the difference between the: a) Market price and the minimum price required to induce production b) The maximum willingness to pay of consumers and the market price c) Quantity demanded and the quantity supplied at the market price d
- Price discrimination: A. is a way to legally charge a higher price to people you don't like. B. forces producers to make a tradeoff between charging low prices or high prices. C. works because consumers are ignorant about the practice. D. is a type of non
- If the price elasticity of demand for a product is greater than 1, then a. higher prices will increase demand for the good. b. consumers are relatively responsive to price changes. c. higher prices will reduce demand for the good. d. higher prices wil
- If the market for a good is in equilibrium at a price of $20, what is true about consumer surplus? Consumers enjoy surplus equal to $20 per unit on all units of the good consumed. Consumer surplus is
- Inflation is: a) Price levels that rise over 100% within a short period of time. b) Increase in the price levels that result in lower prices passed onto consumers. c) An overall increase in the price levels across the board. d) An increase in the pric
- Something is a normal good if the demand for the good A. increases as the consumer's income increases. B. increases as the consumer's income decreases. C. increases if the price of a complement good increases. D. increases if the price of a complement goo
- A consumer has $300 to spend on goods X and Y. The market prices of these two goods are P_X = $15 and P_Y = $5. a. What is the market rate of substitution between goods X and Y? b. Show how the consumer's opportunity set changes if income increases by $30
- Sticky prices in oligopoly markets are: A. represented by the kinked demand curve model. B. typical of cartels. C. most common for highly differentiated products. D. a result of price discrimination.
- When prices are regulated by the government, in the way they are with price ceilings and price floors, A. this results in greater efficiency in the market. B. this interferes with the rationing function of prices in a free market system. C. this does not
- An increase in the general price level: a) Decreases consumption by increasing consumer wealth, b) Decreases the real value of the money fixed assets, c) Shifts the consumption function upward, d) Both, a) and b).
- When shopping in some countries, bargaining is standard. The sellers ask for a high price to start and then decrease the price until the sale is made. This is due to: A. producers trying to gain as much consumer surplus as they can. B. prices changing so
- Consider three consumers indexed by i ∈ {1, 2, 3) with the following demand functions for a public good G. p1 = 20 - (1/10) G, p2 = 20 - (1/10) G, p3 = 30 - (2/10) G Where pi is the price consumer i is willing to pay for a quantity of G. If marginal
- When the price of a good rises, one effect of this change in price is that some consumers switch to more affordable substitutes, which helps us understand the law of demand. What is this effect called? a. Marginal utility effect b. Substitution effect
- When the price of a good rises, one effect of this change in price is that some consumers switch to more affordable substitutes, which helps us understand the law of demand. What is this effect called? a. Marginal utility effect b. Substitution effect c.
- The substitution bias in the consumer price index refers to the idea that consumers _______ the quantity of products they buy in response to price, and the CPI does not reflect this and thus _______ the cost of the market basket. A) change; overestimates
- When the price of a good rises, one effect of this change in price is that some consumers switch to more affordable substitutes, which helps us understand the law of demand. What is this effect called? a. substitution effect b. marginal utility effect c.
- A price increase will cause a relatively large drop in quantity demanded when: a. demand is perfectly inelastic. b. the price elasticity of demand is 0. c. there is very little time allowed for consumers to react. d. the consumer has easy access to a n
- The cumulative difference between the price producers actually receive for a good and the lowest price for which they would have been willing to sell it is called: a. producer surplus b. lost surplus c. total economics surplus d. consumer surplus
- At a price of $5, consumers buy 200 units of good X. When the price falls to $4, quantity demanded increases to 250 units. We can conclude that over this range, demand is: A) unit elastic. B) inelastic. C) elastic. D) perfectly inelastic.
- If the market price is $4.50, the consumer surplus in the market will be _____.
- Pricing Strategy Is the Right Price a Fair Price? Prices are often set to satisfy demand or to reflect the premium that consumers are willing to pay for a product or service. Some critics shudder, ho
- Consider a market where supply and demand are given by QXS = -10 + PX and QXd = 68 - 2PX. Suppose the government imposes a price floor of $30, and agrees to purchase and discard any and all units consumers do not buy at the floor price of $30 per unit.
- Consider a market where supply and demand are given by QXS = -14 + PX and QXd = 76 - 2PX. Suppose the government imposes a price floor of $35, and agrees to purchase and discard any and all units consumers do not buy at the floor price of $35 per unit. I
- The Consumer Price Index (CPI) measures the changes of the: A. prices paid by all businesses for a fixed market basket of production resources. B. quantities of a fixed market basket of goods produced by businesses. C. lowest prices paid by consumers for
- If six people listed in the table are the only consumers in the market and the equilibrium price is $11 (not the $8 shown), how much consumer surplus will the market generate? __Consumer Surplus__ ||(I) Person||(2) Maximum price willing to pay||(3) Actu
- An increase in consumer spending: (a) It will reduce aggregate demand and decrease the price level (b) Increase the gross domestic product and the price level (c) It will increase aggregate supply and decrease the price level (d) It will not change the pr
Explore our homework questions and answers library
Browse
by subject