Chapter 4

The interaction of, and applications of demand and supply

Price controls

Price controls	Free market may not have the best outcome Government intervenes -max price -min price -price support Comodity agreements
Max price control	Government sets a max price below the equilibrium price Product is a nessecity Druing times of food shortage To ensure poor have food Problems- black market Queues at storees Government might have to reduce the shortage Shift demand curve to the leftm goes against imposing max cost as it limits consumption Move supply curve to the right 1-offer subsidys 2- produce good themselves 3- realease stored goods The governemnt inccurs a cost and forced to take money out of other areas.
Max price control	Sets a a min price above the equilibrium prices Floor prices 1. to raise income for the producers of goods such as agriculture 2. to proteect workers with min wage Excess suply creates problems Surplusses governemt intervenes Store the surplus, destroy it or sell it abroad Oppurtinity cost for this though 2 waysfor min cost to be matainined Quotas and advertizement Problems may occur Innificiency and waste of resoruces
Price support and buffer stock schemes	Governments stabilise prices- raw materials Bumper crop- abundent supply Poor weather will drive priices up Big swings in demand on other raw materials too Swings in the commodity market Unstabel will cause negative consequences governmetns will intervene Buffer stock manager sts a price band Problems- non parishable goods High costs of storage Financial preasure People want high proffit
Commodity agreements	Different countrys ina buffer stock scheme commodity price agreement Support commodity producers in noob countrys Rubber