Elucidate entity establishes a price ceiling

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Microeconomics concepts

1. What entity establishes a price ceiling and does it require government sanction for violators? Will it result in a surplus or a shortage?

2. If a producer overproduces and sets the price of his product too high to allow him to sell all of his production, does this cause a surplus or an excess supply condition?

3. What entity establishes a price floor and does it require government sanction for violators? Will it result in a surplus or a shortage?

4. An increase in the supply of a good is expected to have what effect on its price? What will be the effect on the demand for substitutes?

5. If the own-price elasticity of demand for gasoline is -.2 and there is a 10% increase (+.10) in the price of gasoline, what will be the percentage change to the equilibrium demand for gasoline?

6. Define a black market in terms of a Price Ceiling.

7. A regulated transportation monopoly is losing money. The Monopoly goes to its government regulators with a request to raise their rates (price). An economist on the regulatory commission says that raising rates will bring in less revenue as customers change to substitute forms of transportation. The Monopoly and the economist have different views of the elasticity of demand for the monopoly's transportation services. Which one thinks the demand is inelastic and which one thinks it is elastic?

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