Explain why a disequilibrium will exist in the corn market as prices rise from p1 and p2

1 answer:

6 0

When markets fail to clear and achieve their final equilibrium point, they are said to be in disequilibrium. Disequilibrium might develop if the price was lower than the market equilibrium price, causing demand to exceed supply, resulting in a shortage. Government regulations, non-profit maximization actions, and 'sticky' prices can all cause disequilibrium. The demand (Q1) is greater than the supply (P1) at a price of P1 (Q3). As consumers try to get the limited supply, this disequilibrium will result in a shortage (Q1-Q3) and long lines. In a free market, you'd expect businesses to deal with this imbalance by raising prices to ration demand.

Causes of disequilibrium

Sticky prices: Firms may be committed to maintaining the same price for the entire year. As a result, if demand rises over the season, there will be a shortage because the company does not want to continuously changing pricing — especially when demand is erratic. There are menu costs in adjusting pricing, but they can also upset customers by raising prices constantly.
Social factors: Firms may intentionally keep prices low because they believe they have an obligation to the community - for example, landlords not raising rent, or football teams not raising ticket costs.
Non-profit maximizing decisions: Individuals are assumed to be rational and endeavor to maximize utility in economics. Other forces, though, are at play in the real world. Ub3r, for example, uses 'surge pricing,' which allows the price to climb in response to high demand, encouraging more drivers to work. However, this might mean that in the event of a natural disaster, Uber appears to be profiting from 'unfairly high' costs. Uber's algorithms have been adjusted to override these equilibrium prices.
Government controls: ex maximum or minimum prices or government regulating prices, ex train tickets limited by rail regulators.

<h2>Price above equilibrium</h2>

In other circumstances, the price may be set higher than the equilibrium price, resulting in a surplus of supply. At P2, supply exceeds demand, implying that businesses have surplus inventory they can't sell. There is a Q3-Q2 surplus. In a free market, the market price should fall to P1, where demand equals supply.

You might be interested in

What is a key difference between the U.S. and Chinese system of government?

scoray [572]

The answer is B. because the U.S is a democracy where people have a say in politics but China's government holds absolute power over all citizens without giving them a say in government.

4 0

4 years ago

If you had a choice of what type of reproduction you would use to take over the planet which one would it be

dolphi86 [110]

Answer: Asexual

Explanation:

Asexual reproduction is a type of reproduction that does not involve the fusion of gametes or change in the number of chromosomes. The offspring that arise by asexual reproduction from either unicellular or multicellular organisms inherit the full set of genes of their single parent. Asexual reproduction is the primary form of reproduction for single-celled organisms such as archaea and bacteria. Many eukaryotic organisms including plants, animals, and fungi can also reproduce asexually. In vertebrates, the most common form of asexual reproduction is parthenogenesis, which is typically used as an alternative to sexual reproduction in times when reproductive opportunities are limited.

6 0

3 years ago

Read 2 more answers

Do defendants enjoy too many rights

cricket20 [7]

No, because we all have the same rights

5 0

4 years ago

Your child is obsessed with putting oatmeal in the cd drive, and pushing the buttons to see if that food reappears. what would p

Goshia [24]

What would Piaget say most likely in this behavior is that the behavior that the child is showing means that it has the signs of means-end behavior and emerging object permanence. It is because in means end behavior, is a way of doing or showing a specific behavior in which could be expected or unexpected in which they carry out to achieve something they want or their goal. While the emerging object permanence is a way of having a belief that inanimate objects does exist. It could be seen above as the child continues the behavior because of his belief that the food will reappear, in the same time, he has the belief that the food will be produced because he thinks that it would exist with just the push of the button.

5 0

4 years ago

One of the mothers in loraine's mothers group has started purchasing raw, unpasteurized milk and feeding it to her children. the

jonny [76]

I believe the answer is: The pasteurization process heats foods to kill pathogenic microorganisms and reduce the total number of bacteria

The pasteurization process was first introduced by by Louis Pasteur in 1864 because at that time, the milk that sold in the stores did not passing proper sterilization process. This cause many people to develop various disease form the milk such as typhoid fever, diphtheria, and brucellosis.

8 0

3 years ago