TABLE 4-3

-Refer to Table 4-3. The government imposes a $1.20 price ceiling at the same time that there is a substantial decrease in the price of sport utility vehicles. (Assume that sport utility vehicles have very high fuel consumption.) What is the expected result?

Question

TABLE 4-3
 
-Refer to Table 4-3. The government imposes a $1.20 price ceiling at the same time that there is a substantial decrease in the price of sport utility vehicles. (Assume that sport utility vehicles have very high fuel consumption.) What is the expected result?

Quizplus · Accepted Answer

A price ceiling set at $1.20 will cap the price of gasoline at this level, leading to a higher quantity demanded than supplied, thus creating a shortage. The decrease in the price of sport utility vehicles, which consume a lot of fuel, would likely increase the demand for gasoline, exacerbating the shortage.

TABLE 4-3 -Refer to Table 4-3. the Government Imposes a $1.20 Price