Question

FILL IN THE BLANK Please add the appropriate word or words to complete the sentences. 1. Price ceilings are governmental price that are set the market equilibrium price. 2. This kind of policy typically creates a(n) because the quantity demanded the quantity supplied. 3. Price floors are governmental price that are imposed the market equilibrium price. 4. This kind of policy usually generates a(n) in the market because the quantity exceeds the quantity . 5. Shortages and surpluses are reflected in inventories. Inventory is the raw material to goods or the stocks of finished goods that are ready to be sold. g

Answer 1

1. Price ceilings are governmental price that are set below the market equilibrium price.

2. This kind of policy typically creates a shortage because the quantity demanded exceeds the quantity supplied.

3. Price floors are governmental price that are imposed above the market equilibrium price.

4. This kind of policy usually generates a surplus in the market because the quantity supplied exceeds the quantity demanded.

5. Shortages and surpluses are reflected in inventories. Inventory is the raw material which is processed to goods or the stocks of finished goods that are ready to be sold.

Step-by-step explanation:

Price ceilings, as a part of the price control mechanisms, seem to benefit the consumers, while price floors are attempts to support suppliers and producers. While they roll back the excesses of market forces in determining the prices of goods and services, some unintended consequences, including allocative inefficiencies, usually arise from price ceilings and price floors. Therefore, they should be applied sparingly.