Price Ceiling Practice Problem | (STEP-BY-STEP SOLUTION)| PART 1 | Think Econ

[@ThinkEcon]

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[@VeritasDude]

Great video. Follow up question: why would consumption happen at the shorter end when a price ceiling is initiated at a dusequlibrium price? With a lower price point, wouldn't the quantity demanded increase? And now that vendor has already sunk money into buying buses, wouldn't it want to offer more rides, especially more than 900 to recoup the costs or earn the same amount of profit it would have at 900 rides with a $3 price?

[@ThinkEcon]

What a great question! In introductory economics we present demand and supply as linear. In realism this isn't the case. So while in this illustration it may make sense for the seller to provide more services with a lower price, the rationale of the short-side rule is that the economic agent who is worse-off from the disequilibrium event (in this case, that's the seller) dictates the quantity amount traded in the market. The idea is that if the quantity supplied is too low, the price must be driven up to achieve equilibrium once again, benefitting the seller. However, in the case of government sanctioned price ceilings, what you suggest in your comment is actually what happens in the real world, and what is taught in economic models, unfortunately, does not always translate perfectly to the real world behaviours of buyers and sellers. Once again, a great question, and it really shows a higher level of understanding to even ask such a thing rather than simply taking it as a given.

[@VeritasDude]

@@ThinkEcon Thank you for providing the rationale behind the theory. Very well explained. Thank you and please keep these videos coming!

[@sof185]

I like how you explain things

[@Nurcesmesi3445]

beneficial educational content for economics of students.

[@samt7082]

great video. easy to follow, well explained

[@ThinkEcon]

Thank you!

[@-Saumya]

THANK YOU!

[@ThinkEcon]

You’re welcome!

[@RazerAndTurtletommy]

TYSM!!!🥰

[@ThinkEcon]

No problem! Glad you found it helpful!

[@girlwhowentbazzinga]

what would be a consumer and producer surplus in this problem

[@ThinkEcon]

Consider watching this video and tell me if that helps you visualize where CS and PS are. If not, I can explain it for you! kzbin.info/www/bejne/laGVg5-NnMhjoLcsi=bNyjOKGsrXtUqGk6

[@Kethy767]

this was very helpful

[@ThinkEcon]

I’m glad to hear that! :)

[@user-hc7lh1tv8y]

Sir this is really helpful thank you so much and please sir make a video on how to calculate chnage in producer and consumer surplus using imposition of tax.