Asked by
Albert Quaku Junior
on Dec 05, 2024
Verified
Suppose that, at the market clearing price of natural gas, the price elasticity of demand is -1.2 and the price elasticity of supply is 0.6. What will result from a price ceiling that is 10 percent below the market clearing price?
A) A shortage equal to 1.8 percent of the market clearing quantity
B) A shortage equal to 0.6 percent of the market clearing quantity
C) A shortage equal to 18 percent of the market clearing quantity
D) A shortage equal to 6 percent of the market clearing quantity
E) More information is needed.
Price Elasticity of Demand
A measure that calculates the responsiveness, or elasticity, of the quantity demanded of a good to a change in its price.
Price Ceiling
A government-imposed limit on the price charged for a product, intended to prevent prices from rising too high.
Market Clearing Price
The price at which supply equals demand in a market, leading to no unsold surplus or shortages.
- Examining the impact of changes in quantity demanded/supplied due to price controls.
Verified Answer
VM
Learning Objectives
- Examining the impact of changes in quantity demanded/supplied due to price controls.