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Specification:

  • Price controls

Click to read the article below and then answer the questions:

Europe’s airlines clash with Italian premier over planned fare cap

  • What happened to the price of tickets from mainland Italy to the islands of Sicily and Sardinia? 

  • What market shifts (supply or demand) would explain this change in equilibrium price? 

  • The Italian plan would cap prices during the high season at 200 per cent of average prices. Why do you think the price cap proposal allows a higher than average price during the high season?

  • Draw a market with an effective price ceiling. How does quantity demanded compare to quantity supplied? What is the difference called?

Ariel Slonim at MRU Econinbox

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