--%>
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 : Difference among proforma financial

    Describe difference among pro forma financial statements and a cash budget? Depict why pro forma financial statements are not utilized to forecast cash needs. Pro forma income statements deal along with revenues and expenses which are not alway

    		•
  • Q : What is Finance Conversion Code listing

    Finance Conversion Code (FCC) Listing: This is a listing distributed by the State Controller's Office to the departments each spring, that is based on departmental coding updates, will state how the salaries and wages detail will be d

    		•
  • Q : What is Personal Services Personal

    Personal Services: It is a category of expenditure that comprises such objects of expenditures as the payment of wages and salaries of state employees and employee advantages, comprising the state's contribution to the Public Employees' Retirement Fun

    		•
  • Q : Define Limited-Term Position

    Limited-Term Position (LT): Any place that has been authorized only for a particular length of time with a set termination date.Limited-term positions might be authorized throughout the budget procedure or in transactions approved by the D

    		•
  • Q : What is Out-of-State Travel blanket

    Out-of-State Travel (OST) blanket: The request by a state agency for Governor’s Office approval of the proposed out-of-state trips to be taken by that agency’s personnel throughout the fiscal year.

    		•
  • Q : Define Executive Order Executive Order

    Executive Order (EO): It is a budget document, issued by the Department of Finance, asking for the State Controller’s Office to make an adjustment in their accounts. The adjustments are usually authorized by the Budget Act provision language, Bu

    		•
  • Q : Role of depreciation in estimating

    What kind of role does depreciation play in estimating incremental cash flows? Depreciation expense is a tax deductible expense and therefore affects cash flow through its effect on taxes. Depreciation expense which is incremental to a proposed

    		•
  • Q : Define Organization Code Organization

    Organization Code: The four-digit code allotted to each state governmental entity (and at times to exclusive budgetary programs) for fiscal system aims. The organization code is the initial segment of the budget item or appropriation

    		•
  • Q : Negative consequences of company

    Explain negative consequences of a company holding too much cash? A company holding too much cash would be giving up the chance to invest more in income generating assets

    		•
  • Q : Define the term Unencumbered Balance

    Define the term Unencumbered Balance: It is the balance of an appropriation not so far committed for particular purposes.

    		•