Question

the equilibrium price for parking in the downtown area of a large city is about $35 a day, this is represented by pe in the graph above. the city council is looking at ways to resolve parking complaints in the city and one councilperson suggests that the maximum people should be forced to pay is $25 a day. would this help relieve parking congestion in the city? why or why not?

Answer 1

Setting a price ceiling for parking below the market equilibrium would likely increase demand and create a shortage of available spaces, exacerbating parking congestion rather than alleviating it.

Step-by-step explanation:

If a city council sets the maximum price that people should pay for parking to $25 a day, below the equilibrium price of $35, this could lead to parking congestion rather than alleviate it. Similar to rent control measures, setting a maximum price below the market equilibrium will likely increase the demand for parking spaces since they are cheaper, but it will not increase the supply. The example provided about a rent control law setting a price ceiling shows that when the price is fixed below the market rate, demand often exceeds supply, resulting in a shortage.

In the parking scenario, the quantity demanded for parking spaces would likely exceed the quantity supplied at the cheaper rate, creating a shortage of available spaces, making parking congestion worse. As with rental units, there are fewer parking spaces available at the lower price than there would be at the market price. Thus, the suggestion by the councilperson, while well-intentioned to make parking more affordable, would not help to relieve parking congestion and could actually exacerbate the problem.

Answer 2

No

Step-by-step explanation:

Parking congestion would actually get worse as there would be fewer spots available as quantity supplied falls and more people wanting to park downtown as quantity demanded rises.