Reference no: EM132373286

The market for daycare in Albany is initially in equilibrium at $200 per week, with 2000 children in daycare services and no waiting lists. When the city sets a price ceiling at $175 per week, the number of children in daycare falls to 1900, and 200 children are placed on waiting lists for daycare services.

A. On one graph, clearly label the axes and show the original equilibrium with supply and demand curves, drawing a dotted line from the equilibrium point to the P axis and to the Q axis.

B. Include on the same graph the market outcome with the price ceiling, drawing a solid line to represent the price ceiling, drawing a dotted line from the supply curve at the new quantity supplied to the Q axis, and drawing a dotted line from the demand curve at the new quantity demanded to the P axis. On the Q axis, label these points Qs and Qd, respectively, along with the appropriate numbers for Qs and Qd.

C. Identify, on the same graph, the surplus or shortage of daycare slots that occurs with the price regulation and clearly label it on your graph.

D. Outline, on the same graph, the deadweight loss caused by the price regulation, shade it in, and clearly label it on your graph.