All categories

2 years ago

Why is a price floor set above an equilibrium price tends to cause persistent imbalances in the market?

Business

1 answer:

kotykmax [81]2 years ago

5 0

Answer:

A price floor set above the equilibrium price will result in a surplus of supply.

Explanation.

An equilibrium price refers to the price at which demand for a service or product is equivalent to the quantity of the product or service supplied in the market.

Setting a price floor above the equilibrium price essentially means that the set prices will be higher than what demand is willing to pay for the product or service. Demand will therefore purchase fewer quantity of the product offered by supply at the prevailing price than they would have at equilibrium price.

Since the price floor will raise the product price to considerably higher than the equilibrium price, supply will be willing to provide higher volumes of the product at the prevailing price than at equilibrium price.

This will lead to a mismatch in the market between supply and demand resulting into a surplus.

You might be interested in

Kilian Health Foods has 19 comma 000 shares of $ 3 par common stock outstanding, which were issued at $ 14 per share. Kilian al

Marta_Voda [28]

Answer:

$178,000

Explanation:

The computation of the total stockholders' equity is shown below:

= Share capital + additional paid in capital - deficit balance in retained earnings

where,

Share capital = 19,000 shares × $3 = $57,000

Additional paid in capital = 19,000 shares × $11 = $209,000

And, the deficit balance in Retained Earnings is $88,000

Now put these values to the above formula

So, the value would be equal to

= $57,000 + $209,000 - $88,000

= $178,000

3 0

2 years ago

In a market economy, which of the following is NOT an accepted role of government?

SOVA2 [1]

Answer:

providing for national defense

Explanation:

yes

6 0

1 year ago

What are the biggest obstacles facing walmart and other foreign retailers in India?

larisa86 [58]

Transportation could be a key factor as for obsticals

7 0

2 years ago

The "inverse dependency ratio" is defined as the ratio of

Papessa [141]

Answer:

The correct answer is the option C: the working-age population to the number of dependents.

Explanation:

On one hand, the dependancy ratio is the name given, in the field of economics, to the term that refer to an age-population ratio that are and are not in the labor force. Moreover, this type of ratio focuses in measuring the pressure that the productive population has over the nonproductive population.

On the other hand, the inverse dependay ratio measures the amount of labor force that has to be provided regarding one dependent person. Therefore that it is understandable that the inverse dependency ratio is defined as the reatio of the working-age population to the number of dependents.

6 0

2 years ago

The criteria that parties to a contract must be in agreement is also known as

irga5000 [103]

Answer:

C: Mutual Assent.

Explanation:

Mutual assent is a legal term which represents an agreement by both parties to a contract. When two parties to a contract both have an understanding of the parameters, terms and conditions surrounding a contract, it ultimately implies that they are in agreement; this is generally referred to as mutual assent.

Hence, the criteria that parties to a contract must be in agreement is also known as mutual assent.

In a nutshell, mutual assent connotes agreement, acceptance and consent to a contract by both parties.

7 0

2 years ago