Question

Using specific information and numbers from the graph, explain what would happen if this market if a new price of $15 was instituted by the United States government. Part one identify this is sailing or a floor. How do you know? Part two of the exact amount of shortage or surplus that would result with this result and more or less employment why given the shortage or surplus explained if you would support such a change, give at least two reasons you would or would not.

Answer 1

To properly respond to your question, I need some specific details about the graph you are referring to, such as what market it represents, the supply and demand curves, and the equilibrium price and quantity. However, I can give you a general framework for how to analyze this situation based on the provided context.

### Part One: Identifying Price Control

**1. Price Ceiling or Price Floor?**
- A price of $15 instituted by the government would generally act as a **price floor** if it is set above the equilibrium price. This is because a price floor is a minimum price established by the government, meaning that prices cannot go below this level. If the equilibrium price (the price at which quantity demanded equals quantity supplied) is below $15, then this would create a situation where the price floor is binding, leading to surpluses. However, if the equilibrium price is above $15, it could be a price ceiling, but typically, a government-imposed $15 price is often seen as a price floor in most economic discussions.

### Part Two: Shortage or Surplus

**2. Calculate Shortage or Surplus**
- Let’s assume from the data you provided in the graph that the equilibrium price is $10, with an equilibrium quantity of 100 units. If the government sets a price floor at $15, we can look at the supply and demand at that price.
- If at $15, the quantity supplied increases to 150 units and the quantity demanded drops to 75 units, we would have:
- **Surplus = Quantity Supplied - Quantity Demanded = 150 - 75 = 75 units.**

### Employment Impact
- With a surplus, there would likely be **less employment** in the market because producers would be producing more than consumers are willing to buy at that price. This could lead to layoffs or reduced hiring in response to declining demand.

### Supporting the Change
**3. Would I Support Such a Change?**
- Whether or not to support a price floor of $15 depends on different factors:

**Reasons for support:**
1. **Fair Wages:** A price floor might be designed to ensure fair wages for workers, helping to reduce poverty and increase the standard of living for employees in certain industries.
2. **Encouragement of Production:** The higher price may encourage producers to increase supply, which could lead to better quality products or more sustainable practices over time.

**Reasons against support:**
1. **Market Distortions:** A price floor can lead to excess supply that companies may not be able to sell, leading to waste or difficulties for producers, especially small businesses.
2. **Unemployment:** If the surplus leads to fewer sales, employers might cut jobs, leading to increased unemployment in the sector due to the artificial increase in price.

In conclusion, the introduction of a price floor at $15 without proper attention to the accompanying market dynamics can lead to negative consequences, such as surpluses and potential unemployment, while also having some benefits that need to be weighed carefully. Adjusting policies thoughtfully with consideration for the overall economic impact is crucial.