Rasika Vuppala
11 IB
s
d
P
Q
P min
Q for
demand
Q for
supply
Examples:
• Minimum Wage
• Agricultural
support
Effects of Price Floors:
Surplus
Reduced
Market Size
Allocative inefficiency-the
high price inspires
producers to pr...
a
c
b
d e
Changes that occur:
• Total revenue for producers:
d+f+e.. Now: d+b
• Consumer surplus decreased
(as the...
Possible solutions to Surplus
• The government can throw out the excess, but definitely wasting a lot of
money
• The go...
Price floors IB Economics
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Price floors IB Economics

Just talks into just price floors
Published on: Mar 4, 2016
Published in: Economy & Finance      
Source: www.slideshare.net


Transcripts - Price floors IB Economics

  • 1. Rasika Vuppala 11 IB
  • 2. s d P Q P min Q for demand Q for supply Examples: • Minimum Wage • Agricultural support
  • 3. Effects of Price Floors: Surplus Reduced Market Size Allocative inefficiency-the high price inspires producers to produce more output causing marginal cost to be much higher than the marginal benefit. Cost inefficiency- increase in supply causes increase in cost production which is inefficient because the extra resources used could be used for other things. Informal Markets- some firms might sell their surplus illegally below the equilibrium
  • 4. a c b d e Changes that occur: • Total revenue for producers: d+f+e.. Now: d+b • Consumer surplus decreased (as they pay more and receive less) from a+b+c to only a • Dead weight loss is f+c f
  • 5. Possible solutions to Surplus • The government can throw out the excess, but definitely wasting a lot of money • The government might buy up the surplus and make up for the company’s loss • In my opinion the smartest idea, the government might export that product and introduce it in a foreign market.

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