a. Are China’s price controls described in the news clip price floors or price ceilings?

b. Explain how China’s price controls have created shortages or surpluses in the markets for coal, gasoline, and diesel.

c. Illustrate your answer to part (b) graphically by using the supply and demand model.

Chinese power plants have run short of coal, an unintended effect of government-mandated price controls designed to shield the public from rising global energy costs. Beijing has also frozen retail prices of gasoline and diesel. That helped farmers and the urban poor, but it has spurred sales of gas-guzzling luxury cars and propelled double-digit annual growth in fuel consumption. At the same time, oil refiners are suffering heavy losses and some have begun cutting production, causing fuel shortages.