price control
TRANSCRIPT
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Presented By Mayank JainSem 1, MBA 2010-12DOMS IIT Roorkee
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Governmental Impositions on the Prices Charged.
Determinant on how High or Low Prices can go.
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Policymaker believe Market Price Unfair to Buyer or Seller
Affordability of Staple Food
During Crisis Time
An Attempt to alter the Equilibrium
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Price Ceiling - Max Price that can be Charged for a Good.
Price Floor - Min Price that is Required to Pay for a Good
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D
Quantity
Price
3
2
200
4
S
100
D
Quantity
Price
3
2
200 300
4
S
100
Price Ceiling
Equilibrium
Price Ceiling
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D
Quantity
Price
3
2
200
4
S
100
D
Quantity
Price
3
2
200 800
4
S
100
Shortage
Price Ceiling
Equilibrium
Price Ceiling
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Missed opportunities thus Inefficient market economy
Inefficiency Introduced Inefficient Allocation to Consumers Wasted Resources Inefficiently Low Quality Black Markets Supply side Pressure Discrimination based on Supplier Bias
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Price Floor is a minimum price buyer are required to pay for a good.
The minimum wage is a legal floor on the wage rate.
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`• Equilibrium • Price floor
D
Quantity
Price
3
2
200
4
S
100
D
Quantity
Price
3
2
200 600
4
S
100
Surplus
Price Floor
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Inefficient allocation of sales among Sellers
Wasted Resources
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People Responds to Incentive
Market are Usually a Good Way to Organise Economic Activity
Government can Sometime Improve Market Outcome
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Price control more often then Not Hurts Economy and Society if persisted for Long
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Mayank [email protected]