Read: "The Cause of the California Electricity Shortages: 'Price Controls,'" by Thomas Sowell.

Questions:

1. Draw a diagram containing demand and supply curves to illustrate the effect of a price ceiling on the retail price of electricity.
2. Sowell notes that the electricity shortage is the result of rising wholesale costs of electricity combined with a price ceiling on retail prices. Use a diagram containing demand and supply curves to illustrate why an increase in wholesale electricity rates caused the shortage to become more severe in 2001.