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Shortage of Trumpets

 

            Cidny Blowhart cannot purchase a student trumpet at her local music stores because of the government's price ceiling on student trumpets. Past band members could always find their instruments before the price ceiling set the maximum price at $600 for student trumpets; $300 less than the old price. Cidny's mother complained that "Cidny is ready to play the trumpet and the shelves at the music store are bare." This has resulted in a great increase for the demand of student trumpets, while the supply has decreased. Consumers are now fighting with each other to be first in line to buy a trumpet.
             The economic shortage of student trumpets caused by the price ceiling resulted in the shortages for both the consumer and producer. Yamaha Corporation of America, one of the leading music stores in the United States, did a recent study on the effects this action had on the entire economy. The equilibrium quantity was 50,000 student trumpets at the equilibrium price of $900. In Figure 1-1, the big gap illustrated between the quantity supplied and the quantity demanded is the shortage of trumpets on the market. When the price of student trumpets was reduced to $600, the consumers demanded 80,000 student trumpets. This is 30,000 more than the equilibrium demand causing an economic shortage because of the price ceiling. The price ceiling caused a transfer of wealth between the consumer and producer. The consumer surplus increased as a result of the decrease in the producer surplus. The consumer surplus, under free market conditions, is Sections A+B+E equaling $9,625. The consumer surplus, under a price ceiling, is Sections A+B+C equaling $17,625. Sections C-E equals $8,000, the amount by which the consumer surplus increased. The producer surplus, under free market conditions, is Sections C+D+F equaling $21,000. The producer surplus, under a price ceiling, is Section D equaling $9,000. Sections CxF equals $12,000, the amount by which the producer surplus decreased.


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