Design a test that distinguishes a binding price control from a decorative one
Three steps, the way the exam actually works: work through the lab, write down your own measurements, then answer a 6-point free response. What you recorded goes to the grader with your writing, so a conclusion that does not follow from your own numbers will cost you the point — exactly as it would with a real reader.
Predict before you look
- A price ceiling forbids prices above a stated level. If the market price is already below that level, what has been forbidden?
- What would have to change about the market for a ceiling that currently does nothing to start producing a shortage?
Nothing to submit here — these are to think through, so the prediction below is an informed one rather than a guess.
Commit to an answer now. It is not graded and being wrong costs nothing — the point is to have something specific to reconcile against once you have the data.
Answer every prediction to unlock the lab. A sentence is enough.
Run the investigation
Predictions first
The procedure and the simulation unlock once you have committed above. Observing before predicting is how a wrong intuition survives a lab intact.
Record what you measured
These are your numbers, not ours. The grader sees them, so your conclusions have to follow from what you actually recorded.
| Equilibrium price | |
|---|---|
| Ceiling set above P* — value used | |
| Shortage at that ceiling | |
| Ceiling set below P* — value used | |
| Shortage at that ceiling | |
| Floor set below P* — value used | |
| Surplus at that floor | |
| Floor set above P* — value used | |
| Surplus at that floor |
Answer the free response
A policymaker claims that any price control changes market outcomes. Your four trials test that claim. (a) State the general rule your data support about when a ceiling binds and when a floor binds, and explain why the rule takes that form. (b) Using one of your binding trials, verify the reported gap by computing quantity demanded and quantity supplied at the controlled price from the curve equations, which the lab states as demand from a choke price of 100 and supply from an intercept of 20 at reset. (c) A ceiling above the equilibrium price produced no shortage. Explain why this is not evidence that ceilings are ineffective in general, and identify one real circumstance in which a previously non-binding ceiling would begin to bind with no change in the law. (d) Identify one important consequence of a binding price ceiling that this simulation does not model at all, and explain how a student relying only on this lab would be misled.
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