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a price ceiling set below the market equilibrium creates an excess demand, leading to a shortage of the good. Think about it like this, if a good is a lot cheaper than it should be, more people would want to buy it, but less people would want to make it, since its so cheap.

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14y ago

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Related Questions

What do you have when the actual price in a market is below the equilibrium price?

Excess Supply


What is a maximum price set below the equilibrium price?

Price Floor.


What is the maximum displacement of a particle within a wave above or below its equalibreum position?

The maximum displacement of a particle within a wave above or below its equilibrium position is called the "amplitude" of the wave. It represents the maximum distance the particle moves away from its equilibrium position in either direction as the wave passes through.


The maximum displacement of a particle within a wave above or below its position is called amplitude?

equilibrium amplitude


Binding price floor in a market sets price?

below equilibrium price and causes a shortage


The maximum displacement of a particle within a wave above or below it's blank position is called amplitude?

equilibrium amplitude


What is price equilibrium or market equilibrium?

Price equilibrium, or market equilibrium, occurs when the quantity of a good or service demanded by consumers equals the quantity supplied by producers at a specific price level. At this point, there is no tendency for the price to change, as the market clears, meaning all goods produced are sold. If the price is above equilibrium, excess supply leads to downward pressure on prices, while prices below equilibrium create excess demand, pushing prices up. Thus, market equilibrium represents a stable state in economic transactions.


What are the concequences of implimenting minumum or maximum prices for goods and services?

When a maximum price is set for a good or service, it is set below the equilibrium. This is supposed to help consumers but due to the excess demand, a black market will emerge and goods and services will be sold at black market prices (which will be higher than the maximum price or price ceiling) A minumum price is set abouve the equlibrium price. This is done to help producers, however all this will do is create an excess supply and a black market will emerge where goods will be sold at a lower price.


Why price ceiling and price floor is binding?

A price ceiling is binding when it is below the equilibrium price. It is the legal maximum price, so the market wants to reach equilibrium (which is above that) but can't legally. If it were above the equilibrium price it would not be binding because the market would reach equilibrium and the ceiling would have no effect. A price floor is binding when it is above the equilibrium price. You can use similar reasoning to that above. It is the legal minimum price. the market wants to reach equilibrium below that but can't legally.


When a surplus of a product will arise when price is above equilibrium or below equilibrium?

above equilibrium


The maximum displacement of a particle with a wave above or below its position is called amplitude?

The statement is incorrect. The maximum displacement of a particle from its equilibrium position in a wave is known as the amplitude of the wave, not the amplitude of the particle itself.


What is the amplitude of the wave shown below?

The amplitude of a wave is the maximum displacement from the equilibrium position. It is half the distance between the crest and trough of the wave. Can you please provide the wave you are referring to?