Please write your answers for each of the following question

Please write your answers for each of the following questions: 0 1. What is a price ceiling? What is a price floor? Give a real world example of each. What happens to the relationship between quantity demanded and the quantity supplied with an effective price ceiling? What happens to the relationship between quantity demanded and the quantity supplied with an effective price floor? What is likely to happen if there is a shortage of rent controlled apartments? What is likely to happen if there is a surplus of price supported grain? 2. Americans over the age of 65 are covered by Medicare. For them, the medical market is a third-payer market. What is a third-party payer market? How does total quantity of medical services provided in a third-payer market, such as Medicare, compare to a market in which the purchaser of medical services pays the full cost? How does price of medical services provided in a third-part payer market, such as Medicare, compare to the price in a market in which the purchaser of medical services pays the full cost? Ifthird-payer markets, such as Medicare, benefit buyers by providing a greater quantity of services and sellers by yielding a higher price, who is hurt by such a payments system?

Solution

Price ceiling is the maximum legal price what a seller can charge. Whereas price floor is the minimum legal price.

Real life example, rent control Act is a price ceiling and minimum support price is a price floor application.

When there is effective price ceiling then there is excess demand. Thus quantity supplied is less and quantity demanded is more.If there is shortage of rent controlled apartments then black market can prevail, quality of rent apartment decreases etc.

In minimum price support,govt. Have to intervene in the market and needs to purchase the surplus from the market and govt. Accumulates buffer stock which the govt. Sells out at subsidized rates through PDS