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How does the price system respond to surpluses and shortages?
In: Economics [Edit categories]
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∙ 10y ago
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How does the invisible hand of competition set a market price in market economies?
Shortages always raise prices and surpluses always reduce prices until competition produces a price where there are no more surpluses or shortages.
What happens when government imposes price ceilings and floors in a market?
efficiency
Why does this situation seldom happen in market economie?
Competition eliminates shortages and surpluses by setting a market- clearing price.
Explain why shortages and surpluses are not temporary when price controls are used?
If the price ceiling is above the market price then there's no direct effect. If the price ceiling is set below the market price, then a shortage is created. :)
Will the removal of a price ceiling result in progressively lower surpluses?
A price ceiling causes shortages ... not surpluses. So the answer would be no. see http://www.google.com.au/search?q=price+ceiling+&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a
How does the invisible hand of competition set a market price in market economies?
Shortages always raise prices and surpluses always reduce prices until competition produces a price where there are no more surpluses or shortages.
How does the invisible hand of competition set a market price in a market economy?
b. Shortages always raise prices and surpluses always reduce prices until competition produces a price where there are no more surpluses or shortages. ;D
What happens when government imposes price ceilings and floors in a market?
efficiency
Why does this situation seldom happen in market economie?
Competition eliminates shortages and surpluses by setting a market- clearing price.
Explain why shortages and surpluses are not temporary when price controls are used?
If the price ceiling is above the market price then there's no direct effect. If the price ceiling is set below the market price, then a shortage is created. :)
Will the removal of a price ceiling result in progressively lower surpluses?
A price ceiling causes shortages ... not surpluses. So the answer would be no. see http://www.google.com.au/search?q=price+ceiling+&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a
Which example best demonstrates the effect of artificial price controls on supply and demand?
Rent controls result in shortages and minimum wage laws result in surpluses
Why does the time it takes to reach equilibrium vary from market to market?
It takes time to reach the equilibrium because they don't know what is the "right price" to sell the product. whether prices change quickly or slowly however once they move toward equilibrium shortages and surpluses start to disappear.
HOW DID SURPLUSES AFFECT THE SUPPLY AND DEMAND ECONOMY?
A surplus will tend to drive the price down.
Rationing is an attempt to limit shortages that naturally result what?
Price ceiling
If the price of a product is above the equilibrium price what is the result?
suppliers produce more than consumers want to purchase and the suppliers end up with surpluses.
Why is pure competition an ideal market structure?
Because, if unrestrained by a meddlesome government, it results in THE most efficient allocation of resources. At the equilibrium price, all the sellers will be able to sell exactly as much as they want to sell, and all the buyers will be able to buy exactly as much as they want to buy. No shortages, no surpluses. Companies make a reasonable, but not windfall profit.
