Question 1:
a) Define the term maximum price legislation.
b) Describe the idea by using an appropriate diagram.
c) Trace out the welfare effects of such exercise.
Question 2:
a) Describe the idea of minimum price legislation.
b) Describe the idea by considering the labor market.
c) Compute the welfare effects of this exercise.
Question 3:
a) If a specific tax is imposed then illustrate that for the buyer the price increases, for the seller the price drops.
b) Let consider a competitive market for wheat. Determine the impact of a price support program (price floor) on the quantity demanded and supplied. Do you think that the price support is responsible for over-production?
c) In the similar market if the government decides to follow a price contact policy, then what would be the impact on the quantity of wheat produced and the related welfare impacts?
Question 4:
a) Examine the economic effects of tariff.
b) Describe the conditions beneath which quota is equivalent to the tariff.
Question 5:
a) Differentiate between the market equilibrium and changes in the market equilibrium.
b) Under what conditions will change in market equilibrium lead to raise in both price and quantity?