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When Market Participants Are Allowed Through Their Interactions to Find

question 148

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When market participants are allowed through their interactions to find the price,there will be equilibrium where the quantity supplied by buyers equals the quantity supplied by sellers.If this is the case,why does the government intervene in certain markets by imposing a price floor? Why does the government intervene in certain markets by imposing a price ceiling? Which market participant (the buyer or the seller)will lobby the government to secure passage of a binding price floor? Which one will lobby for a binding price ceiling?


Definitions:

Aggregate Demand

The total demand for all goods and services within an economy at various price levels, in a given time period.

Consumer Demand

The desire of individuals or households to purchase goods and services at certain prices.

Investment Goods

Goods that are purchased not for immediate consumption but for producing other goods or services in the future.

Classical Economists

Economists from the late 18th and 19th centuries who believed in the principles of free markets, limited government, and self-regulating behavior of the economy.

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