Assume you are a policymaker in Washington DC. Lobbyists for the preschoolers of
ID: 1179019 • Letter: A
Question
Assume you are a policymaker in Washington DC. Lobbyists for the preschoolers of America have put pressure on their representatives to cap prices on graham crackers. You have been assigned a position on a new committee to study the impact of a price ceiling on graham crackers. Your job is to: a)Illustrate using a fully labeled supply and demand graph (label all the axes and any lines you put in your graph) what such an articial price looks like; b)Explain what the results of such a move are for the graham cracker market. In other words, will there e a SHORTAGE, a SURPLUS, or neither created? Why?
Explanation / Answer
When price was ceiled at P1 , then supply will fall short of demand because quantity supplied is less than quantity demanded