Question
Coal Shortage at China Plants Chinese power plants have run short of coal, an unintended effect of government-mandated price controls - a throwback to communist central planning ----- to shield the public from rising global energy costs. ... Beijing has also frozen retail prices of gasoline and diesel. ... Oil refiners say they are suffering heavy losses and some began cutting production last year, causing fuel shortages in parts of China's south.
(a) Are China's price controls described in the news clip price floors or price ceilings?
(b) Explain how China's price controls have created shortages or surpluses in the markets for coal, petrol, and diesel.
(c) Illustrate your answer to (b) graphically by using the supply and demand model.
(d) Explain how China's price controls have changed consumer surplus, producer surplus, total surplus, and the deadweight loss in the markets for coal, petrol, and diesel.
(e) Illustrate and show your answer to (d) graphically by using the supply and demand model.