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How price floor (Minimum Price) results misallocation pf resources A) Want to know how Price floor causes mis allocation of resources , I know that
How price floor (Minimum Price) results misallocation pf resources
A) Want to know how Price floor causes mis allocation of resources , I know that price floor causes Excess supply .
B) Same with price ceiling , how it results in misallocation of resources , here the price ceiling causes excess demand or shortage of supply.
please illustrate perfectly , dont want hunches
arrangements as well as Talony involved. In summary government-imposed minimum prices cause: Excess supply Misallocation of resources Waste of resources. AS External analysis - economic factors of products whic al Policy (CAP If applied to physical goods, then price floors cause surpluses of products have to be stored or destroyed. With the EU Common Agricultural Policy this has over the years, resulted in the EU storing large quantities of food ("butter mountains"), selling the surplus to countries outside the EU (such as Russia) and even paying farmers not to grow the product in the first place but remove land from agricultural use (so called "set aside" conditions). Another way of looking at the same problem is to state that it leads to a misallocation of resources both in the product and/or the factor market which causes lower economic growth. There also may be the temptation for firms to attempt to ignore the price floor, for example, by informal arrangements with workers, which would lead to a further waste of resources in implementing such arrangements as well as raising issues of fair treatment for the workers involved. ES5532 In summary government-imposed minimum prices cause: Excess supply Misallocation of resources Waste of resourcesStep by Step Solution
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