Question

Even though I was willing to pay up to $64 for a used textbook and even though the seller was willing to go as low as $59 in order to sell it, we couldn't reach a deal because the government imposed a price ceiling of $54 on the sale of textbooks.

Answer 1

Answer:

This is an example for the regulation of the government having a negative impact on trade.

The celling policy if people trade below that value is uneffective and useless but, if the agent of the market trade above the celling in some transactiosn (this book may be a best.seller or a book which is hard to find in the given moment) the regulation prohibits and no trade is done. No trade implies neither consumper or producer surplus. While the government state the celling acts in well-being and good for the consumer in this case it is proved wrongly. The consumer would pay between 59 and 64 having a surplus and the produced above 59 will also enjoy a surplus from trade.

Explanation: