Market Disequilibrium - DEMAND, SUPPLY, AND MARKET...

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DEMAND, SUPPLY, AND MARKET EQUILIBRIUM I. PRICE CONTROLS A. DISEQUILIBRIUM - if price is not at an equilibrium, there are forces that will change the price: 1. If price is above the equilibrium price, then market surpluses will exist and suppliers will lower their prices to try to eliminate the surpluses. At the lower prices, buyers will be willing and able to purchase a greater quantity. 2. If price is below the equilibrium price, then market shortages will exist and buyers will compete with one another for the scarce product by offering higher prices. At the higher prices, suppliers will be willing and able to produce and sell a greater quantity. B. PRICE CEILINGS AND FLOORS 1. If there is an artificial restraint placed on the price of a product, shortages and surpluses will continue unless the price happens to be fixed at the equilibrium level. 2. Price ceiling - if a producer is not allowed (by government) to charge greater than a ceiling price (that is below the equilibrium price), then some producers will
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Market Disequilibrium - DEMAND, SUPPLY, AND MARKET...

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