Lesson 22 pg. 66 - 68

Question 1

What is the result of price fixing by governments?

Answer 1

The result of price fixing by governments is either overproduction or underproduction of goods, resulting in serious damage to economies.

Question 2

Define price ceiling

Answer 2

price ceiling - when governments place a limit on how high a producer may charge for his product

Question 3

Describe the result of price ceiling

Answer 3

If prices are set below the point at which producers can make profits, producers will stop supplying, but consumers will still demand these goods
>result will be a shortage of goods, the situation that occurs when the quantity of goods demanded is greater than the quantity supplied
>when substantial shortage of needed goods, consumers must take time to find out if the goods they want may obtained and where
>then consumers have to stand in lines for hours to buy them, or they may have to wait for months, or they may even have to travel to other regions if they want those goods
>the delay and discontentment caused by economic shortages most often occur in countries with command economies

Question 4

Define price floors

Answer 4

price floors - price levels set above the equilibrium prices

Question 5

Describe the result of governments pushing price floors

Answer 5

While producers are eager to suppl goods at higher prices, consumers are reluctant to pay for them, resulting in a surplus of goods.
>suppliers become discouraged because few people will buy what they produce, and potential customers become upset that they cannot obtain the goods they want at reasonable prices