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Слайды и текст этой презентации

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Introduction to Economics Demand & Supply Continued Janet McCaig

Слайд 2

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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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Underground Markets Traditionally referred to as black markets Government prices and controls are ignored and people illegally sell at whatever price illegal demand and supply create