Your job is to:
a.) Illustrate using a supply and demand graph what such an artificial price looks like.
b.) Explain what the results of such a move are for the graham cracker market. In other words, will there be a SHORTAGE, a SURPLUS, or neither created?
c.) Finally, what are the impacts of this price ceiling for those who wish to purchase graham crackers? (In other words, what is the unintended consequence of this action?) Given that there is a max price set, it will only be affordable to produce a certain number in order to be cost effective for the manufacturer. Which, in turn, will create a shortage.
This question was asked on Jan 26, 2014 and answered on Jan 26, 2014.
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