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When the market price of a good is below its equilibrium value and all other determinants are unchanged?
Wiki User
∙ 9y ago
When the market price is below its equilibrium value, with all else remaining equal, the demand for the good will rise, shifting the demand curve. The system will then move back into equilibrium with the new price and demand.
Wiki User
∙ 9y ago
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A shortage will develop when?
The market price is below the equilibrium price.
What do you have when the actual price in a market is below the equilibrium price?
Excess Supply
What happens to prices set below market equilibrium?
There are a number of things that will happen to prices set below market equilibrium. They will cause a high demand and this will result in limited supply due to the low prices.
Why price ceiling and price floor is binding?
A price ceiling is binding when it is below the equilibrium price. It is the legal maximum price, so the market wants to reach equilibrium (which is above that) but can't legally. If it were above the equilibrium price it would not be binding because the market would reach equilibrium and the ceiling would have no effect. A price floor is binding when it is above the equilibrium price. You can use similar reasoning to that above. It is the legal minimum price. the market wants to reach equilibrium below that but can't legally.
Binding price floor in a market sets price?
below equilibrium price and causes a shortage
A shortage will develop when?
The market price is below the equilibrium price.
What do you have when the actual price in a market is below the equilibrium price?
Excess Supply
What happens to prices set below market equilibrium?
There are a number of things that will happen to prices set below market equilibrium. They will cause a high demand and this will result in limited supply due to the low prices.
A shortage develop when?
The equilibrium quantity supplied is lower than the actual quantity supplied. The market price is below the equilibrium price.
Why price ceiling and price floor is binding?
A price ceiling is binding when it is below the equilibrium price. It is the legal maximum price, so the market wants to reach equilibrium (which is above that) but can't legally. If it were above the equilibrium price it would not be binding because the market would reach equilibrium and the ceiling would have no effect. A price floor is binding when it is above the equilibrium price. You can use similar reasoning to that above. It is the legal minimum price. the market wants to reach equilibrium below that but can't legally.
Binding price floor in a market sets price?
below equilibrium price and causes a shortage
