Answer :
Final answer:
The prices buyers are willing to pay for a Ford F-150 truck are described as demand prices, representing the maximum price consumers are willing to pay at different quantities. Price controls such as price ceilings and floors disrupt market equilibrium, changing consumer and producer surplus and leading to a loss of social surplus. The correct option is D.
Explanation:
The prices that various buyers are willing to pay for a Ford F-150 truck would be best described as demand prices. These represent the price that consumers are willing to pay for a unit of the good or service at different quantities.
A price control is a regulation by the government to fix the price of a commodity. There are two types of price controls: price ceiling, which is a legal maximum price for a good or service, and price floor, which is a legal minimum price.
When a price ceiling, such as $400 for the Ford F-150 truck, is set below the equilibrium price, it can cause a shortage because the quantity demanded (Qd) exceeds the quantity supplied (Qs). Conversely, when a price floor is set above the equilibrium, it can lead to a surplus because the quantity supplied will be higher than the quantity demanded.
Consumer surplus is the benefit consumers receive from purchasing a product for less than they are willing to pay, while producer surplus is the benefit producers receive from selling a product for more than they were willing to accept.
With a price ceiling of $400, with reduced quantity, new consumer surplus becomes T + V, and new producer surplus is X. These price controls, while intended to help consumers or producers, often reduce the overall efficiency of the market, leading to a net negative effect on social surplus. The correct option is D.
