Pair C Paper 1 - question a.) template for answer by Humanities https://padlet.com/BISHumanities/xvhxq7kw27418b1m Honing your skills of DDEE en-us 2021-05-04 13:16:59 UTC 2024-07-20 11:14:05 UTC hello@padlet.com REAL WORLD EXAMPLES BISHumanities https://padlet.com/BISHumanities/xvhxq7kw27418b1m/wish/1489472250 A more specific example of this may be the $13 price floor imposed in New York in 2017 in an attempt to reduce sales for cigarettes by lowering the demand and by almost doubling the national average for a pack of cigarettes ($6.65).

A specific example took place in the US in the 1970s when the government imposed a price ceiling on rapidly rising gasoline prices. The goal of this was to make it affordable for the consumers to purchase gasoline and get the benefits from the consumption, though it did cause quite a bit of shortage of supply as a result. 


]]> 2021-05-04 13:16:59 UTC https://padlet.com/BISHumanities/xvhxq7kw27418b1m/wish/1489472250 EXPLANATION BISHumanities https://padlet.com/BISHumanities/xvhxq7kw27418b1m/wish/1489472254 Price floor will set a minimum price, so the suppliers will be forced to raise their prices. The new price will definitely result in lower demand as not as many consumers can afford it. There is a contraction in demand from b (market equilibrium) to a that occurs as result of the increase in supply created by the price floor. Thus, there is a clear surplus of supply, as there is not enough consumer demand. This can be useful when the government is intentionally trying to reduce the demand for a good or service. The government may want this if there is a market failure, such as a demerit good, causing negative externalities. An example can be smoking and its external costs to society such as consequences of passive smoking. Therefore, a government may introduce a price floor in order to significantly reduce demand and fix the market failure.

Price ceiling achieves a different outcome, since it sets a maximum price for the suppliers to sell goods and services at. This results in higher demand than supply, because of the price being too low foremost producers to supply at. Lowered prices will attract more consumers and can be represented as an extension in demand from B to C. The government may want to use this regulation in order to forcefully increase demand, or protect consumers from high prices set by the suppliers.

]]> 2021-05-04 13:16:59 UTC https://padlet.com/BISHumanities/xvhxq7kw27418b1m/wish/1489472254 DIAGRAMS BISHumanities https://padlet.com/BISHumanities/xvhxq7kw27418b1m/wish/1489472257 2021-05-04 13:16:59 UTC https://padlet.com/BISHumanities/xvhxq7kw27418b1m/wish/1489472257 DEFINITIONS BISHumanities https://padlet.com/BISHumanities/xvhxq7kw27418b1m/wish/1489472260 Price ceiling is when the government sets a price that producers can not set their prices beyond. In order to maximise effectiveness, it must be set below the market equilibrium.
In contrast, a price floor is the minimum price that producers can supply at. For best results, price floors should be set above the market equilibrium.
Both of these are methods to combat market failure, which can be defined as an inefficiency within a market, or a failure to allocate resources. 
]]> 2021-05-04 13:16:59 UTC https://padlet.com/BISHumanities/xvhxq7kw27418b1m/wish/1489472260 Explain why governments sometimes impose price ceilings and price floors. [10 marks] https://padlet.com/BISHumanities/xvhxq7kw27418b1m/wish/1490049030 2021-05-04 15:06:57 UTC https://padlet.com/BISHumanities/xvhxq7kw27418b1m/wish/1490049030