Assignment:
Respond to two or more of your colleagues' postings in one or more of the following ways:
- Ask a probing question.
- Share an insight from having read your colleague's posting.
- Offer and support an opinion.
- Make a suggestion.
- Expand on your colleague's posting.
When the prices are regulated, the supply, as well as the demand of the fuel, must be affected (Frank et al., 2017). This means that when the prices are set at a level that is lower than the expectations of the suppliers, they shall not be encouraged by such actions. This is because the incentive that attracts the suppliers to supply more into the market is a higher price. When the prices are high, the supply is also higher than normal. However, when the prices are low, the suppliers bring a small quantity into the market.
The amounts of fuel that are demanded in the market by the consumers shall go up as a result of having low prices due to price regulation. (Frank et al., 2017) This is because low prices attract higher demand for the quantity supplied. The implication is that the amounts demanded shall not be met adequately by the quantities supplied into the market.
In terms of economic efficiency, a regulated market is better because the buyers in the market are not exploited by traders charging high prices (Frank et al., 2017). Therefore, commodities are only sold and bought at their deserving prices. The extortion in the market by unscrupulous traders is ended when the market is regulated. A free economy is highly liberal such that traders take advantage of the market conditions according to the quantities supplied. Sometimes, suppliers intentionally hoard commodities to create artificial shortage so that prices would hike, and they would benefit themselves, creating economic inefficiency (Frank et al., 2017). Therefore, economic efficiency is realized under regulated market.
Reference
Frank, R. H., Bernanke, B. S., Antonovics, K., & Heffetz, O. (2017). Principles of microeconomics: A streamlined approach (3rd ed.). New York, NY: McGraw-Hill/Irwin.
Supply and Demand in a Regulated Market
Supply and demand are affected by market forces. When the prices are high and the demand is high, the supply will high too. But, when the prices are low and supply is high the demand will also be high or low based on the commodity. Demand affect supply in different ways. When the demand is low, the supply can also be low or high resulting in market saturation. When the demand is high and the prices high the supply will be high or low based on commodity.
The demand and supply will be affected by the rates set by the energy department. Instead, when the demand is high and the market has to regulate the prices and the supply is low, there will be an increase in price. But, when the prices are low and demand is low too, the supply will be low too. Thus, the prices will high since the market will also consider tilting towards the price set by the Energy Department.
Thus, a regulated market will offer a better efficiency based on the supply and demands of the fuel. This is important when developing a free market which will offer the regulation based on demand and supply. The prices will be influenced based on the demands and supplies in the market. Hence, a free market will be a better regulation when dealing with choices, options, and also focusing on changes in the supply and demand for fuel products.
References
Frechette, G. R., Lizzeri, A., & Salz, T. (2018). Frictions in a competitive, regulated market: Evidence from taxis (No. w24921). National Bureau of Economic Research.