What do economists mean when they say “price floors and ceilings stifle the rationing function of prices and distort r esourceallocation ”? LO5

a. Use the figeu r to fill in the quantity supplied on supply curve S1 for each price in the table below.

b. If por duction costs ewre to incerase, the quantities supplied at each price would be as shown by the third column of the table (“S2 Quantity Supplied”).

Use those data to draw supply curve S2 on the same graph as supply curve S1.

c. In theo ufrth column f othe table, enter the amyo unt b which the quantity supplied at each price changes due to the increase in product costs. (Use positive numbers for increases and negative numbers for decreases.)

d. Did the inecarse in podr uction cotss cause a “decrease in supply” or a “decrease in quantity supplied”?

Transcribed Image Text:

S S Change In Quantity Price Supplied Quantity Supplied Quantity Supplied $3 4 2 1 20