Why is business concerned about you as a consumer and as a wage earner?
Why is business concerned about you as a consumer and as a wage earner?
Business affects you as a wage earner because they provide jobs. Consumers decide what kind of goods and services they want. goods and services they want. The decisions of consumers can determine the success or failure of a business.
Why are entrepreneurs essential to the success of a free enterprise economy?
Entrepreneurs are important because they are willing to take risks to start new businesses, so they become the catalyst of the free enterprise economy. Most entrepreneurs fail, but some survive and a few even become wealthy.
Why should money be scarce?
Without money there would be less trade and therefore less specialization and productive inefficiency. Therefore, from the same quantity of resources, LESS would be produced . Therefore money allows us to use our limited resources wisely and produce MORE with the same amount of resources. this helps to reduce scarcity.
Which causes a shortage of a good?
Which causes a shortage of a good—a price ceiling or a price floor? A price ceiling prevents the price from being raised to the equilibrium level. Since the price is not high enough, firms will supply less than the quantity demanded, and there will be a shortage.
What happens when there is a shortage in the market?
A Market Shortage occurs when there is excess demand- that is quantity demanded is greater than quantity supplied. In this situation, consumers won’t be able to buy as much of a good as they would like. The increase in price will be too much for some consumers and they will no longer demand the product.
Why do prices rise when there is a shortage?
Therefore, shortage drives price up. If a surplus exist, price must fall in order to entice additional quantity demanded and reduce quantity supplied until the surplus is eliminated. If a shortage exists, price must rise in order to entice additional supply and reduce quantity demanded until the shortage is eliminated.
What happens if demand is higher than supply?
As we will see after, if demand is greater than the supply, there is a shortage (more items are demanded at a higher price, less items are offered at this same price, therefore, there is a shortage). If the supply increases, the price decreases, and if the supply decreases, the price increases.
Why do prices go up when there is a shortage?
When there is more supply, this will cause prices to fall because people will not want to pay more for items that can be found easily. When there is more demand, prices will go up because many people want to buy the same item but there is not enough supply for it.
What happens if demand goes up?
Demand Increase: price increases, quantity increases. Demand Decrease: price decreases, quantity decreases. Supply Increase: price decreases, quantity increases. Supply Decrease: price increases, quantity decreases.
How do falling prices hurt the economy and cause a depression?
Only deflation caused by falling demand could be said to have caused the Depression. A policy of boosting demand would raise both prices and output, thus contributing to recovery. However, a decrease in supply would raise prices by reducing output, making the Depression even worse.
How do you get a shortage and surplus?
Shortage = Quantity demanded (Qd) > Quantity supplied (Qs) A surplus occurs when the quantity supplied is greater than the quantity demanded.
What is the quickest way to eliminate a surplus?
The quickest way to solve surplus is to lower the price so that demand will increase and remove the surplus.
At what price is there neither a shortage nor a surplus?
a. Market equilibrium occurs at the point where market clears, that is, where quantity supplied is equal to quantity demanded. In other words, equilibrium price is the price at which there exists neither surplus nor shortage.
Does a price floor create a surplus?
When a price ceiling is set below the equilibrium price, quantity demanded will exceed quantity supplied, and excess demand or shortages will result. When a price floor is set above the equilibrium price, quantity supplied will exceed quantity demanded, and excess supply or surpluses will result.
Is a real life example of a price floor?
Perhaps the best-known example of a price floor is the minimum wage, which is based on the view that someone working full time should be able to afford a basic standard of living. The federal minimum wage in 2016 was $7.25 per hour, although some states and localities have a higher minimum wage.
What does it mean when a price floor is binding?
1. Binding Price Floor. A binding price floor is one that is greater than the equilibrium market price. Consider the figure below: The equilibrium market price is P* and the equilibrium market quantity is Q*.
What happens if a price floor is not binding?
Non-binding price floor: price floors set below the market price have no effect. If the price floor is set below the market price (the price at which the good is actually sold, not what the price would be in perfect competition), it has no effect on the market price or quantity traded.
What is the difference between a price floor and a price support?
Thus, a price support is different from a price floor because, with a price floor, any excess production by sellers is a burden on the sellers. In contrast, with a price support, any excess production is a burden on the government.
Is there a price floor on gas?
Since gasoline must be sold at or below the price ceiling of $2.00, there is no effect. The equilibrium price and quantity will remain at their present levels.
Is a price support a price floor?
Price supports are similar to price floors in that, when binding, they cause a market to maintain a price above that which would exist in a free-market equilibrium. Unlike price floors, however, price supports don’t operate by simply mandating a minimum price.
