Ceilings and Floors:
Assignment
Wheat Market:
Assume that US wheat farmers
have gotten so successful in growing wheat that they have flooded the market
with wheat and therefore the EP has collapsed.
Farmers discover that selling
wheat at the EP price will cause them to go bankrupt.
On a supply and demand graph,
show how the government steps in with a price that allows wheat farmers to
create profit.
What will the immediate
result be in this market with the new price?
What can you predict about
the market in the next few years when farmers are now
guaranteed a profit for
growing wheat?
Bottled and Drinkable Water
Market:
Assume that a hurricane has
ripped through a major coastal city. The
EP price of potable water is now sky-high and profiteers are taking cruel
advantage of pricing this essential item.
On a supply and demand graph,
show how the government steps in with a price
that allows normal people to
able to afford water.
What will the immediate
result be in this market with the new, enforced price?
What can you predict about
the market in the immediate future as suppliers react to this legal limit to
their profits?
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