Why is it true that shortages usually occur mainly when price controls are in effect?
What will be an ideal response?
In the absence of price controls the shortage usually goes away quickly because prices are bid up to eliminate the excess demand. But with price controls in effect the shortage usually persists. This helps explain why we usually only see long lines in effect when the government imposes a price ceiling like it did during the 1970s so-called gas crisis.
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Real GDP refers to GDP adjusted:
A) for changes in ruling political party. B) for changes in tax rates. C) for changes in net imports. D) for changes in prices.
Refer to Table 4.1, which shows Flo's and Rita's individual supply schedules for frozen latte-on-a-stick. Assuming Flo and Rita are the only suppliers in the market, what is the market quantity supplied at a price of $1?
A) 0 B) 1 C) 3 D) 5