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In this type of economy the price consumers pay is set by the government?
67
What type of economy best fits this description The price consumers pay is set by the government.?
Controlled
Why does the government sometimes set prices?
Governments sometimes set prices to protect producers and consumers from dramatic price swings.
1 How does consumer perception of the product value can set the ceiling for prices?
Consumers do not set a price ceiling on goods. Only the government can set a price ceiling. However, the consumer perception of a good's value does affect the equilibrium price and quantity demanded. This is the price that the good is sold at and how many of the good is demanded at that price.
Causes of black market?
In some cases, when governments or regulatory bodies set a maximum price for a good, this leads to black markets. To be effective, the maximum price has to be below the market price that prevails as a result of the interaction of demand and supply. For example, the market price of wheat is $5. Government is regulating the industry and fixes a price of $4 as the maximum price. Supply of wheat is going to reduce and demand is going to increase based on the laws of demand and supply. This will lead to a shortage as people are demanding more wheat than is being supplied. Some consumers will be willing to pay the original market price for wheat ($5) and some will be willing to pay even higher. This leads to a black market where suppliers will provide the willing consumers with wheat at a price higher than the prevailing one.
In this type of economy the price consumers pay is set by the government?
67
What type of economy best fits this description The price consumers pay is set by the government.?
Controlled
Why does the government sometimes set prices?
Governments sometimes set prices to protect producers and consumers from dramatic price swings.
1 How does consumer perception of the product value can set the ceiling for prices?
Consumers do not set a price ceiling on goods. Only the government can set a price ceiling. However, the consumer perception of a good's value does affect the equilibrium price and quantity demanded. This is the price that the good is sold at and how many of the good is demanded at that price.
An example of price floor?
A price floor is government imposed limit on how low a price can be charged for a product or service. An example of a price floor in the US are minimum wage laws. The government has set the minimum wage that a company can pay an employee.
A legal maximum price at which a good can be sold is a price?
A legal maximum price at which a good can be sold is a price ceiling. It is set by the government to protect consumers from high prices, but it can lead to shortages and reduce incentives for producers to supply the good.
How much VAT do South African consumers pay?
Currently set at 14%
What is price control?
A price control is a ceiling that is set by the government, which does not allow the price of a product to rise above a certain level. The reasons for setting price controls usually have something to do with a particular situation. For example, during a time of war, price controls may be set. Another reason could be a necessary commodity which has continued to rise in cost, making it prohibitively expensive for consumers.
What occurs when two or more businesses secretly agree to set their prices artificially high and agree not to lower them which forces consumers to pay more than they would if no agreement existed?
price fixing
Causes of black market?
In some cases, when governments or regulatory bodies set a maximum price for a good, this leads to black markets. To be effective, the maximum price has to be below the market price that prevails as a result of the interaction of demand and supply. For example, the market price of wheat is $5. Government is regulating the industry and fixes a price of $4 as the maximum price. Supply of wheat is going to reduce and demand is going to increase based on the laws of demand and supply. This will lead to a shortage as people are demanding more wheat than is being supplied. Some consumers will be willing to pay the original market price for wheat ($5) and some will be willing to pay even higher. This leads to a black market where suppliers will provide the willing consumers with wheat at a price higher than the prevailing one.
An example of price floor in Pakistan?
Government of Pakistan always set a minimum price level of wheat to support the farmers from disheartening. Means that if the farmer is getting less price for its wheat crop in the open market. He may sell his wheat to government of Pakistan at a high price which set by the government.
When does a price ceiling occur?
The ceiling price (maximum price) is set by the government. It is set below the equilibrium price (because if it were above, there will be a surplus and equilibrium will be stored due to market forces). It is illegal to sell any item above the maximum price. By setting a maximum price, a shortage is created - since quantity demanded is greater than quantity supplied. The purpose of maximum price is to ensure that the price of goods is affordable, especially for poorer families. Unfortunately, by setting a maximum price, there is a possibility that a black market will arise since there will be large numbers of unsatisfied and better-off customers who are willing to pay more than the government-set price. The floor price (minimum price) is another price control that the government uses. It is set above the equilibrium price. Because quantity demanded is less than quantity supplied, a surplus is created. These surplus goods are usually stockpiled by the Government. The purpose of a minimum price is to protect producers from receiving low prices for their produce.
