Presented By Mayank Jain Sem 1, MBA 2010-12 DOMS IIT Roorkee
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Presented By Mayank JainSem 1, MBA 2010-12DOMS IIT Roorkee
Governmental Impositions on the Prices Charged.
Determinant on how High or Low Prices can go.
Policymaker believe Market Price Unfair to Buyer or Seller
Affordability of Staple Food
During Crisis Time
An Attempt to alter the Equilibrium
Price Ceiling - Max Price that can be Charged for a Good.
Price Floor - Min Price that is Required to Pay for a Good
D
Quantity
Price
3
2
200
4
S
100
D
Quantity
Price
3
2
200 300
4
S
100
Price Ceiling
Equilibrium
Price Ceiling
D
Quantity
Price
3
2
200
4
S
100
D
Quantity
Price
3
2
200 800
4
S
100
Shortage
Price Ceiling
Equilibrium
Price Ceiling
Missed opportunities thus Inefficient market economy
Inefficiency Introduced Inefficient Allocation to Consumers Wasted Resources Inefficiently Low Quality Black Markets Supply side Pressure Discrimination based on Supplier Bias
Price Floor is a minimum price buyer are required to pay for a good.
The minimum wage is a legal floor on the wage rate.
`• Equilibrium • Price floor
D
Quantity
Price
3
2
200
4
S
100
D
Quantity
Price
3
2
200 600
4
S
100
Surplus
Price Floor
Inefficient allocation of sales among Sellers
Wasted Resources
People Responds to Incentive
Market are Usually a Good Way to Organise Economic Activity
Government can Sometime Improve Market Outcome
Price control more often then Not Hurts Economy and Society if persisted for Long
Mayank [email protected]
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