At the beginning of the pandemic, people were buying essential goods. One of the goods that was the most reported in the news was toilet paper. Now imagine, most store owners decided to increase the price of a pack of toilet paper to $50. These high prices provoked cries of "price gouging" and calls on the government to impose price controls to prevent gouging. While no one likes to pay a higher price than normal for something, consider what would have happened with a price ceiling. The economic intuition is revealing.

1. Draw a correctly labelled demand and supply graph for the market for toilet paper in the US with an equilibrium price of $20 per pack. [3 points]

2. During the pandemic, people were buying toilet paper in fear that it would run out. On the same graph, show how this affects the market for toilet paper. Explain your answer. [3 points]

3. Now impose a price ceiling of $15 per pack. What would be the impact of the price ceiling on the quantity demanded and the quantity supplied? Illustrate this on the graph and explain. [3 points]

4. Will the price ceiling create a shortage or excess supply? Explain. [2 points]

5. Who would benefit from the price ceiling and who would be harmed? Explain your answer. Let the graph guide your thinking. Don't start with your gut reaction! [2 points]

6. Let's suppose the government now impose a price floor of $15 for a pack of toilet paper. Draw the market for toilet paper with a new price floor of $15 and Illustrate the impact on quantity demanded and quantity supplied [3 points]

7. Give an example of a price floor and who would benefit from it and who would be harmed? Explain your answer. Remember to reference the source. [3 points]