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Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

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BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

What mechanisms allocate resources when the price of a good is not allowed to bring supply and demand into equilibrium?

To determine
The mechanisms that allocate resources when price is not allowed to bring the demand and supply into equilibrium.

Explanation

The equilibrium price and quantity are determined by the intersection of the demand curve and the supply curve in the economy. At the equilibrium level there will be neither excess supply nor excess demand in the economy. The price floor is the minimum price that can be charged for the product in the market. This is to prevent the prices from being too low and make loss to the producers and service providers. The price ceiling is the maximum limit price that can be charged for a good or a service in the market. This is to prevent the prices from going too high and prevent the exploitation of the consumers...

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