Introduction to economics. Demand & supply

Сентябрь 11, 2022

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Экономика
Introduction to economics. Demand & supply

Содержание

2. The Control of Prices At the equilibrium price there will be no shortage or surplus. May
4. Minimum price A price floor set by government or some other agency The price is not
5. Maximum Price A price ceiling set by the government or some other agency. The price is
6. Setting a minimum (high) price To protect producers incomes (industries subject to fluctuations) To create a
7. How do Gnvts deal with Surpluses associated with minimum prices? Buy & store, destroy, sell abroad
8. Setting a Maximum (low) price Fairness, famine, war Associated problems “first come first served” Preference to
9. Underground Markets Traditionally referred to as black markets Government prices and controls are ignored and people
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The Control of Prices
At the equilibrium price there will be no

shortage or surplus.
May not be the most desired price - Government intervention
Government sets a minimum price above the equilibrium there will be a surplus
Government sets a maximum price below the equilibrium there will be a shortage

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Minimum price
A price floor set by government or some other agency
The

price is not allowed to fall below this level (although it is allowed to rise above it)

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Maximum Price
A price ceiling set by the government or some other

agency.
The price is not allowed to rise above this level (although it is allowed to fall below it)

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Setting a minimum (high) price
To protect producers incomes (industries subject to

fluctuations)
To create a surplus ( to be stored for future shortages)
In the case of wages to prevent workers wages falling below a certain level (gnvt policy on poverty and inequality)

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How do Gnvts deal with Surpluses associated with minimum prices?
Buy &

store, destroy, sell abroad
Artificially reduce supply by restricting producers – introducing quotas
Raise demand - ^ advertising, alternative uses - impose taxes or subsidies on substitutes
Problems – evasion, inefficiency

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Setting a Maximum (low) price
Fairness, famine, war
Associated problems “first come first

served”
Preference to regular customers
May lead to underground markets – ignoring price and selling illegally
Rationing – gnvt restricts amount people allowed to buy

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