📚 Learning Guide
Price Controls and Market Outcomes
hard

Price controls are to market equilibrium as a tightrope walker is to:

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Learning Path
Learning Path

Question & Answer
1
Understand Question
2
Review Options
3
Learn Explanation
4
Explore Topic

Choose the Best Answer

A

Balance

B

Safety net

C

High winds

D

Spectators

Understanding the Answer

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Answer

Price controls, like price ceilings and price floors, are rules set by the government to limit how high or low prices can go in a market. This is similar to a tightrope walker who must maintain balance while walking on a tightrope; if they lean too much to one side, they risk falling. Just as the tightrope walker must adjust their position to stay balanced, markets must adjust to maintain equilibrium when price controls are in place. For example, if a government sets a price ceiling on rent to keep it affordable, it may lead to a shortage of available apartments because landlords might not find it profitable to rent. In both cases, the challenge is to find stability, whether on a tightrope or in a market.

Detailed Explanation

High winds can make it hard for a tightrope walker to stay balanced. Other options are incorrect because Balance is what the tightrope walker aims for; A safety net helps catch someone if they fall.

Key Concepts

Price Controls
Market Equilibrium
Market Inefficiencies
Topic

Price Controls and Market Outcomes

Difficulty

hard level question

Cognitive Level

understand

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