ture or false the equilibrium price of elbow grease is $5 per kilogram, but the
ID: 1193423 • Letter: T
Question
ture or false
the equilibrium price of elbow grease is $5 per kilogram, but the government has in place a price ceiling at $3 per kilogram. If the government removes the price ceiling, this will cause the price to rise and people will buy more and the equilibrium price of elbow grease is $5 per kilogram, but the government has in place a price ceiling at $3 per kilogram. shoulder grease is a substitute for elbow grease. if the price of shoulder grease falls, then the shortage of elbow grease will grow larger
Explanation / Answer
True. As the shoulder grease being a substitute, the fall in its price will increase the demand of elbow grease even further. Hence the shortage will grow larger because the gap between demand and supply widens.