--%>
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 : Explain the investment opportunity

    Explain the investment opportunity schedule (IOS)? How does it help financial managers take business decisions? The investment opportunity schedule illustrates graphically proposed capital budgeting projects depicting the IRR and dollar amount

    		•
  • Q : Describe time value of money Describe

    Describe time value of money?The time value of money means that money you have in your hand today is worth more than money you expect to obtain in the future. Likewise, money you have to pay out today is a greater burden than the similar a

    		•
  • Q : Public finance can you do this

    can you do this homework? My state Taxes

    		•
  • Q : What can financial institution do for a

    What can a financial institution frequently do for a deficit economic unit (DEU) which it would have complexity doing for itself if the DEU were to deal directly with an SEU?SEUs typically desire to supply a small amount of funds, while DEUs typ

    		•
  • Q : Define One-Time Cost One-Time Cost : A

    One-Time Cost: A proposed or real expenditure that is non-recurring (generally only in one annual budget) and not permanently comprised in baseline expenditures. The departments make baseline adjustments to eradicate prior year one-time costs and suit

    		•
  • Q : Describe sunk cost Describe sunk cost?

    Describe sunk cost? Is it relevant while evaluating a proposed capital budgeting project? Describe. A sunk cost is a cash flow which has already occurred, or that will take place, whether a project is accepted or discarded. It is irrelevant wh

    		•
  • Q : What is Cash Flow Statement What is

    What is Cash Flow Statement: It is a statement of cash receipts and disbursements for a particular time period.

    		•
  • Q : Multiplier for private closed economy

    Normal 0 false false

  • Q : State Section 31.00 Section 31.00 : It

    Section 31.00: It is a Control Section of Budget Act which specifies some administrative procedures. For illustration, the section subjects to the Budget Act appropriations to different sections of the Government Code, restricts the new positions a de

    		•
  • Q : How do flotation costs influence the

    Normal 0 false false