Differentiate between price ceilings and price floors. Explain how government subsidies affect consumer prices. Discuss indirect taxes on sin goods.

Here are the answers to your economics questions:

2.1.5 Differentiate between maximum prices (price ceilings) and minimum prices (price floors).

• A maximum price (price ceiling) is a legal limit set by the government on how high the price of a good or service can be. It is set below the equilibrium price to make essential goods more affordable for consumers.
• A minimum price (price floor) is a legal limit set by the government on how low the price of a good or service can be. It is set above the equilibrium price to support producers by ensuring they receive a certain income.

2.1.6 Explain how a government subsidy granted to poultry farmers could help lower the final price of chicken for consumers.

A government subsidy to poultry farmers reduces their cost of production. This shifts the supply curve for chicken to the right, meaning more chicken is supplied at every price. With an increased supply, the market equilibrium price for chicken falls, leading to a lower final price for consumers.

2.1.7 Discuss the impact of indirect taxes on the supply of "sin goods" (like tobacco or alcohol) and why the government chooses to tax these products.

• Impact on supply: Indirect taxes on sin goods increase the cost of production for firms. This causes the supply curve to shift to the left, meaning less of the good is supplied at every price. This leads to a higher market price and a lower quantity consumed.
• Reasons for taxation: Governments tax sin goods primarily to discourage consumption due to their negative externalities (e.g., health costs, social problems). The revenue generated from these taxes can also be used to fund public services or mitigate the negative effects associated with these goods.