Figure: Random Allocation Under Price Ceilings

question 188

Essay

Figure: Random Allocation under Price Ceilings
Refer to the figure. The government enacted a price ceiling of $6 per unit. Using the information provided in the graph, calculate the following:
a. If the goods are allocated randomly between the high-value uses and the low-value uses, what is the total amount of consumer surplus in dollars?
b. What is the lost amount of consumer surplus when goods are allocated randomly, when compared to a situation in which the goods are allocated only to the highest-value uses?

---

Definitions:

Factor Analysis

A statistical method for analyzing the intercorrelations among various measures or test scores; clusters of measures or scores that are highly correlated are assumed to measure the same underlying trait or ability (factor).

Congruence

The degree to which things align or match up, often used in psychology to describe the alignment between an individual's self-concept and their experiences.

Libido

In psychoanalysis, the psychic energy that fuels the life or sexual instincts of the id.

Ego

In psychoanalysis, the part of personality that represents reason, good sense, and rational self-control.