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A. Think about a product that you have purchased recently (e.g. soda, diapers, takeout meals, milk, shoes, manicure/pedicure, video game, etc.). Explain how the law of demand affected your purchase. Give specific examples of how the determinants of demand and supply affect this product (T-I-P-E-N and P-R-E-S-T). What happens to the demand curve and the supply curve when any of these determinants change? Give examples of scenarios that would cause a change in demand versus a movement along the same demand curve and supply curve for this product. Discuss the new equilibrium price and quantity that result from these changes. Can you demonstrate some of these changes graphically?
B. For your selected product, if the government places a mandated price ABOVE the equilibrium price, how would this affect the market equilibrium?
C. Would you rather have the forces of demand and supply determine the price of gasoline, or would you prefer a government-mandated price ceiling? What problems would a price ceiling on gasoline bring in this market?
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