Question

HELP!!!!!

Suppose a market with a price control causes a surplus. In 3 or 4 sentences, explain why this market is inefficient. Mention the definition of inefficient.

Answer 1

Because that market will bring deadweight loss.

Price control will mess up the natural equilibrium price that exist within the market. Despite that, it still cause a surplus

hope this helps

Answer 2

If a price control causes a surplus the market will become inefficient because:

1. The producer will manufacture the same amount of goods as he did previously but the surplus will increase its cost and the goods will not be sold in the market, it will result in the wastage of goods and resources if they are kept in one place for a long time.

2. The surplus will cause an equilibrium in the market in terms of supply and demand.

3. If the goods are not sold in the market for a long time, it will stop the circulation of money.

Meaning of Inefficiency :

It means the lack of ability to achieve a certain goal without wasting energy, resources and time.