Be sure to explicitly show the impact if any of the price co

Be sure to explicitly show the impact (if any) of the price control law on the market price and quantity exchanged.

Solution

Credit card is used to purchase goods/services without spending cash. It is issued by financial Institutes. If money is paid within the credit period, no interest is charged. But when the amount is due, interest is imposed. The rate is high comparing to prevailing interest rate on other areas.

Now cogress has imposed a law. It limits the upper range of interest on credit card. It is 14%. However at present it is 12%. So at this moment there will be no impact of this law on credit card market. However in future, this term structure of interest rate may rise. If it rises more than 2%, then it will affect the credit card market. If loan of other alternative means attract interest rate higher than 14% then this law will increase the demand of using credit card. If it is not so, then its impact will not be observed.

So at present there is no impact of this law on market price or quantity