How is a preset price similar to a government-imposed price ceiling or a price floor? How is a preset price different from a government-imposed price ceiling or price floor?
Please provide the best answer for the statement.
A preset price is a predetermined price that is set by a business before sales occur. When a preset price is set below the equilibrium price, a shortage will result. This situation is similar to when a government imposes a price ceiling below the equilibrium price. When a preset price is set above the equilibrium price, a surplus can result. This situation is similar to when the government imposes a price floor above the equilibrium price. Although the outcomes are the same, businesses establish a preset price and government establishes a legal price.
You might also like to view...
The supply of cars will be more elastic the:
A. Greater the quantity demanded B. Longer the time interval considered C. Greater the decline in input prices D. Less able producers are to make other goods
The Federal Reserve cannot affect the price level directly; therefore, the Fed typically uses the following as its policy target:
A. Interest rates B. Government expenditures C. Inflation