A problem in Price Theory.
Here’s a question that I gave a number of my students in economics courses at the Naval Postgraduate School. If I recall correctly, a large percent of the students answered it correctly. And this was well before AI. (Of course, since it was on a problem set, they did have a few days to ponder.)
See how you do.
The government imposes a binding price ceiling on oranges. But it does not impose any price ceiling on orange juice. After the price ceiling on oranges is imposed, what will happen to the price of orange juice? (Assume a competitive market for oranges.) Show your work.
In a few days, I’ll post the answer and try to use my cell phone camera to post a diagram of supply and demand.
Meanwhile, have at it, if you so choose.
The post The Effect of Price Controls on Oranges on the Price of Orange Juice appeared first on Econlib.
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Author: David Henderson
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