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How to Study for Chapter 8 Price Floors and Ceilings

Chapter 8 introduces two ways of interfering with the normal working of markets --- maintaining the price above equilibrium (price floors) and maintaining the price below equilibrium (price ceilings).

1. Begin by looking over the Objectives listed below. This will tell you the main points you should be looking for as you read the chapter.

2. New words or definitions are highlighted in italics in the text. Other key points are highlighted in bold type. Answer the questions in the text as they are asked. Then, check your answer by reading further in the text.

3. You have more work with the demand-supply graph in this chapter. In particular, you need to

recognize surpluses and shortages.

4. Do the cases very carefully. Go over the explanations step-by-step. In each case, draw the graph.

5. You will be given an In Class Assignment and a Homework assignment to illustrate the main concepts of this chapter. When you have finished the text and the assignments, go back to the Objectives below. See if you can answer the questions without looking back at the text. If not, go back and re-read that part of the text. Then, try the Practice Quiz for Chapter 8.

Objectives for Chapter 8 Price Floors and Ceilings

At the end of Chapter 8, you will be able to:

1. Define “price floor” and draw it on the demand – supply graph.

2. Give some examples of price floors.

3. Analyze what results if there are price floors.

4. Analyze the results of the price support program for agriculture.

5. Analyze the results of the acreage restriction program for agriculture.

6. Define “price ceiling” and draw it on the demand – supply graph.

7. Name some examples of price ceilings.

8. Analyze the results of price ceilings.

9. Explain how goods and services are rationed if there is a price ceiling.

10. Define “black market” and “gray market”.

11. Use the analysis of price ceilings to analyze the problem...