What Are The Advantages And Disadvantages Of Exchange Rate Regimes

However, both price gouging and price ceilings can have detrimental effects. When suppliers practice price gouging, they are taking advantage of people and overcharging them for the goods that they need. But implementing price ceilings to counteract price gouging can lead to a shortage of needed products and the creation of black markets that allow suppliers to sell their goods at illegal

Many countries such as Canada, India, and the UK have price controls. The governments of these countries impose regulations that control the prices of new drugs as well as generics without compromising safety but at the same time they do not burden pharmaceutical companies

B the permanent movement of funds from one currency to another in the hopes of profiting from long. term investment in a particular country.

However, when the equilibrium price is beyond the expectation of a fair market value, for reasons of political or social concerns governments will intervene in the market and establish limits on such things as wages, apartment rents, electricity, or agricultural commodities. Government uses price ceilings and price floors to keep prices below or above market equilibrium. (Stone, 2012, page 68)

Price Gouging is illegal, however it’s a common practice during a crisis or shortly after it takes place such as a hurricane, floods, or tornadoes. What usually happens is the seller of a good greatly increases the prices of certain items that are in high demand because of the crisis that has taken place. For example, following a hurricane, goods as in wood, paint, bottled

Currency exchange rates can be categorised as floating, in which case they constantly change based on a number of factors, or they can subsequently be fixed to another currency, where they still float, but they additionally move in conjunction with the currency to which they are pegged. Floating rates are a reflection of market movement, demonstrating the principles of both demand and supply, as well as limit imbalances in the international financial system. Fixed exchange rates are predominantly used by developing countries as they are preferred for their greater stability. They grant further control to central banks to set currency values, and are often used to evade market abuse. (MacEachern, A. 2008; Simmons, P.

Currency intervention is the action of one or more governments, central banks, or speculators that increases or reduces the value of a particular currency against another currency – this is according to Wikipedia.

* There is no guarantee firms will follow the leader forcing the leading firm to reduce prices.

·  A monopolist would not be able to increase prices if the demand for a particuar product is elastic.

The purpose of antitrust policy is to promote competition, which leads to lower prices.  If a company had the power of price control that comes with being a monopoly, they would profit by picking the quantity/price that equals the highest revenue for their company.  This would be likely a lower quantity and higher price than would prevail if there was competition.

(DOJ 1997) Note that price fixing doesn 't necessarily need to result in increased prices.

there are a number of different buyers and sellers in the marketplace. This means that we have competition in the market, which allows price to change in response to changes in supply and demand. Furthermore, for almost every product there are substitutes, so if one product becomes too expensive, a buyer can choose a cheaper substitute instead. In a market with many buyers and sellers, both the consumer and the supplier have equal ability to influence price.

The discrimination is not present were buyers pay the same price for the commodities they buy. They can determine any price on the products they sell in future, even if the their costs in serving one buyer are much higher than the costs of serving the other.

Forward contract. Lock in an exchange rate with the bank until a certain future date, with currency projections against the spot rate though.  In this case had an option to have Forward contracts, which allow Nodal fixed exchange rates in the future at no charge, the bank may impose a fee

This chapter sets out the rationale for price discrimination and discusses the two major forms of price discrimination. It then considers the welfare effects and antitrust implications of price discrimination.