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4 marksMarket Equilibrium

CAPE Economics Unit 1 · 2006 · Paper 2 · Question 1(c)(ii)

A government imposes a price ceiling on milk to increase consumption by low-income families.

Explain how consumers and producers will react to the price ceiling.

The mark scheme is shown once you've answered.

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Other parts of this question

  1. 1(a)(i)Define 'equilibrium price'.[2 marks]
  2. 1(a)(ii)Define 'Pareto efficiency'.[2 marks]
  3. 1(a)(iii)Define 'price ceiling'.[2 marks]
  4. 1(b)(i)Discuss four main factors that influence the demand for beef.[12 marks]
  5. 1(b)(ii)Discuss four main factors that influence the supply of beef.[12 marks]
  6. 1(c)(i)Explain why all low-income families may not be able to increase their milk consumption.[6 marks]
  7. 1(c)(iii)Explain what the government might do to maintain the legal price.[3 marks]
  8. 1(c)(iv)Explain what the government might do to ensure low-income families benefit from the pricing policy.[3 marks]
  9. 1(d)Identify one advantage and one disadvantage of the free market allocation of resources.[4 marks]

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