--%>
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 : Methods to determine Promotional Budget

    What are the methods to determine Promotional Budget? Explain in brief.

    		•
  • Q : What is Working Capital and Revolving

    Working Capital and Revolving Fund: For legal base accounting purposes, fund categorization for funds employed to account for the transactions of self-supporting enterprises which render goods or services for a direct charge to the user that is genera

    		•
  • Q : Can a company hold a default rate on

    Can a company hold a default rate on its accounts receivable that is too low? Describe. A company could hold a default rate on AR which would be considered too low if by liberalizing credit terms a significant rise in sales revenue and cash inf

    		•
  • Q : Define Allotment Allotment : The

    Allotment: The permitted division of an amount (generally of an appropriation) to be expended for a specific purpose throughout a particular time period. An allotment is usually authorized on line item expenditure basis by program or

    		•
  • 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 : What is an Element Element : It is a

    Element: It is a subdivision of a budgetary program and the second stage of the program structure in the Uniform Codes Manual.

    		•
  • Q : Explain Proposed New Positions Proposed

    Proposed New Positions: It is a request for an authorization to use up funds to use additional people to execute work. Proposed new positions might be for limited time periods (that is, limited term) and for full or less than full tim

    		•
  • Q : Relationship which MPC bear to the size

    Normal 0 false false

    		•
  • Q : What is Prior Year Adjustment Prior

    Prior Year Adjustment: An adjustment for the difference among prior year accruals and real expenditures or revenues. The previous year adjustment amount is usually comprised in the Fund Condition Statements as an adjustment to realign the starting fun

    		•
  • Q : What is the Schedule of Operating

    Schedule of Operating Expenses and Equipment, Supplementary: The supplemental schedule proposed by department’s throughout budget preparation that details by object the expenses comprised in the Operating Expenses and Equipment class.

    		•