suppose the government yielded to lobbying by a group of market participants and instituted a binding price…

suppose the government yielded to lobbying by a group of market participants and instituted a binding price control at $10. the graph above illustrates the market and the effect of the price control. referring to the graph above answer the select 1. a tax on buyers a price floor a tax on sellers 2. a price ceiling

suppose the government yielded to lobbying by a group of market participants and instituted a binding price control at $10. the graph above illustrates the market and the effect of the price control. referring to the graph above answer the select 1. a tax on buyers a price floor a tax on sellers 2. a price ceiling

Answer

Brief Explanations:

  1. A price - floor is a minimum price set by the government above the equilibrium price. A price - ceiling is a maximum price set by the government below the equilibrium price. Here, the equilibrium price is $20 and the price control is at $10 which is below the equilibrium price, so it is a price - ceiling. Also, a tax on buyers or sellers would shift the demand or supply curves respectively, not set a price level directly.
  2. Since the price control is set below the equilibrium price, it is a price - ceiling.

Answer:

  1. a price ceiling
  2. a price ceiling