--%>
Assignment Help - homework help

Major effects of this price floor

Assume that the government establishes a price ceiling of $3.70 for wheat.  What may prompt the government to establish this price ceiling?  Describe carefully the main influence.  Show your answer graphically. Next, explain that the government establishes a price floor of $4.60 for wheat.  What will be the major effects of this price floor?  Show your answer graphically.

 

1413_wheat price ceiling.png

E

Expert

Verified

At a price of $3.70, buyers will desire to purchase 80,000 bushels, but sellers will just offer 73,000 bushels to the market.  The result is a lack of 7,000 bushels.  The ceiling prevents the price from increasing to encourage greater production, discourage consumption, & relieve the shortage. Distinguish the graph below.

1744_price celing.png

At a price of $4.60, buyers only desire to purchase 65,000 bushels, but sellers desire to sell 79,000 bushels, resulting in a surplus of 14,000 bushels.  The floor stops the price from falling to remove the surplus. Observe the graph below.

 

2467_price celing 2.png

   Related Questions in Finance Basics

  • Q : Describe patterns of cash flows for

    Describe two patterns of cash flows for a share of common stock. How does the market find out the value of the most common cash flow pattern for common stock?Cash flows for share of common stock contain dividend payments and the price attained f

    		•
  • Q : Do mergers result in layoffs Do mergers

    Do mergers result in layoffs?Entire employment in the banking industry in fact has increased slightly over the last ten years. Some mergers do result in layoffs. Though, several banks demolish their staff largely through attrition to ease the tr

    		•
  • Q : Assignments i want to write final state

    i want to write final state report. My state is Texas.

    		•
  • Q : Define Pooled Money Investment Board

    Pooled Money Investment Board (PMIB): The board included of the Director of Finance, State Treasurer, and the State Controller, the aim of which is to design an efficient cash management and investment program, employing all monies fl

    		•
  • Q : What is Special Items of Expense

    Special Items of Expense: It is an expenditure category which covers nonrecurring big expenditures or special aim expenditures which usually need a separate appropriation (or else need separation for clarity).

    		•
  • Q : Define Legislature Legislature,

    Legislature, California: Two-house bodies of elected representatives vested with the accountability and power to make laws affecting the state (that is, except as limited by the veto power of the Governor).

    		•
  • Q : How would the market price of a bond be

    All other things held constant, how would the market price of a bond be influenced if coupon interest payments were made semiannually rather than annually?Most of bonds issued in the United States pay interest semiannually (twice per year). Alo

    		•
  • Q : Define Subcommittee Subcommittee : The

    Subcommittee: The smaller groupings into which the Senate or Assembly committees are frequently divided. For illustration, the fiscal committees which hear the Budget Bill are classified into subcommittees usually by departments or subject area (examp

    		•
  • Q : Define Final Budget Summary Final

    Final Budget Summary: A document generated by the Department of Finance subsequent to enactment of the Budget Act that reflects the Budget Act, any vetoes to the language and/or appropriations, technical corrections to the Budget Act, and summing up t

    		•
  • Q : Supply of automobile tires Normal 0

    Normal 0 false false

    		•