Peter J Wilcoxen > Five Minute Exercises

Effect of a Price Ceiling (+)


A market is now in equilibrum at P=2000, Q=10,000.
The elasticity of supply is 0.2
The elasticity of demand is -0.5
A price ceiling of $1500 is under consideration.

Exercise 1

Determine the transfer from producers to consumers that would result from the ceiling.  Note: you only need to compute the transfer, not the entire change in surplus.


Exercise 2

Determine the overall effect on consumer surplus.


Exercise 3

Determine the deadweight loss from the policy.


If you get stuck...

Graph of the market
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Peter J Wilcoxen, The Maxwell School, Syracuse University
Revised 08/17/2016