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1.8 The market mechanism, market failure and government intervention in markets

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Question 98

A government introduces a maximum price (price ceiling) for basic rental housing below the market equilibrium to assist low-income tenants.

All other things being equal, which one of the following combinations of price elasticities of demand and supply will result in the smallest shortage (excess demand) of rental housing at this maximum price?

A

Demand is price elastic and supply is price elastic.

B

Demand is price inelastic and supply is price inelastic.

C

Demand is income inelastic and supply is price inelastic.

D

Demand is income elastic and supply is price elastic.

Markscheme

1.8 The market mechanism, market failure and government intervention in markets Questions

  1. A Level
  2. /Economics
  3. /1.8 The market mechanism, market failure and government intervention in markets

378 exam-style questions on AQA A Level Economics 1.8 The market mechanism, market failure and government intervention in markets, covering 1.8.1 How markets and prices allocate resources, 1.8.2 The meaning of market failure, 1.8.3 Public goods, private goods and quasi-public goods, 1.8.4 Positive and negative externalities in consumption and production, 1.8.5 Merit and demerit goods, 1.8.6 Market imperfections, 1.8.7 Competition policy (A-level only), 1.8.8 Public ownership, privatisation, regulation and deregulation of markets (A-level only), 1.8.9 Government intervention in markets, and 1.8.10 Government failure. Each one has a worked solution and a mark scheme showing where the marks go.

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