Suppose equilibrium price in a market is $5, and then a price ceiling of $3 is imposed.

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Suppose equilibrium price in a market is $5, and then a price ceiling of $3 is imposed. Assume (as in the chapter) that those who value the product the mostare able to buy whatever quantity is available, and there is no black market.

a. If supply is completely price inelastic between $3 and $5, is there a deadweight loss? Briefly, why or why not?

b. If demand is completely price inelastic between $3 and $5, is there a deadweight loss? Briefly, why or why not?

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Macroeconomics Principles and Applications

ISBN: 978-1133265238

5th edition

Authors: Robert e. hall, marc Lieberman

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Question Posted: Dec 11, 2012 12:25 AM

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Suppose equilibrium price in a market is $5, and then a price ceiling of $3 is imposed.

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a If supply is completely price inelastic between 3 and 5 there is no deadweight loss There is however a transfer from producer surplus to consumer su...View the full answer

Macroeconomics Principles and Applications

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