Need Assistance with discussion board!!! Question:
In the aftemath of the devastating hurricane Sandy in the Northeast and Jersey Shore, prices of certain goods had risen dramatically. Some people had objected to these price increases, and called for the government to forbid sellers from charging such high prices. This exercise asks you to apply economic principles in explaining why prices tend to rise, and what consequences would result from forbidding sellers from raising prices. We will consider the case of bottled fresh water in supermarkets.
1) Draw a graph showing the equilibrium price for the pre-hurricane demand for and supply of bottled water that currently existed in the market place. (label the current equilibrium price as p1 on the price axis, and the quantity as q1 on the quantity axis. (2 point)
Now suppose that the hurricane hits. One effect is to hinder delivery trucks from bringing as much water as before, so the supply of bottled water will be affected.
2) Draw a new supply curve to illustrate this change in supply and label the new supply curve S2. (4 points)
3) Explain the effect on price and quantity if the government establishes a price ceiling at a price below the market equilibrium price? You should draw a graphical representation.(4 points)