--%>
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 : 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 : Making capital structure decisions In a

    In a perfect capital market, what advice would you give a corporate financial manager on making capital structure decisions? Justify your advice. How and why would your advice change as real world capital market imperfections are introduced?

    Q : How do mergers influence communities

    How do mergers influence communities?While a locally controlled bank is merged into a bank headquartered elsewhere (an out-of-market merger), some of the apprehension regarding the institution's future commitment to the local community is bound

    		•
  • Q : Explain intermediation Explain

    Explain intermediation.The financial system makes it achievable for surplus and deficit economic units to come together, exchanging funds for securities, to their mutual profit. While funds flow from surplus economic units to a financial institu

    		•
  • Q : Define COBCP COBCP : Capital outlay

    COBCP: Capital outlay budgets are zero-based each and every year, thus, the department should submit a written capital outlay budget modify proposal for each fresh project or following phase of an existing project for which the department needs fundin

    		•
  • Q : What is an Investment Management

    Investment Management: It has two general definitions, one associating to advisory services and the other associated to corporate finance. In the initial instance, a financial advisor or services company gives inve

    		•
  • Q : Compounded Quarterly In Financial

    1. If you deposit money today in an account that pays 4.3% annual interest, how long will it take to double your money? Round your answer to the nearest whole. years 2. Find the present value of the following ordinary annuities. Ro

    		•
  • Q : Explain Merger Merger : A merger takes

    Merger: A merger takes place whenever two companies unite to form a single company. This is very alike to an acquisition or takeover, apart from that the existing stock-holders of both companies comprised retain a shared interest in the latest corpora

    		•
  • Q : Define Legislative Counsel Bureau

    Legislative Counsel Bureau: The staffs of attorneys who draft legislation (that is, bills) and proposed amendments, and analyze, review, and render beliefs on legal matters for legislative members.

    		•
  • Q : Define Overhead Unit Overhead Unit :

    Overhead Unit: The organizational unit which benefits the production of an article or a service however that can’t be directly related with an article or service to share out all of its expenditures to elements and/or work authorizations. The co

    		•