Explain : 1) "Black Marketing " as a direct consequence of Price ceiling. 2) the concept of Buffer Stock as a tool of price floor. 3) Any four sources of Restricted entry under Monopoly.
Answers
1) A price ceiling is an upper limit set by the government, it is a form of a price control. It is an attempt of the government to control the prices for the public so that they don't end up paying high prices. So when there is price ceiling there are people who try to sell the product at higher prices or at the original price, the price which would have been in the absence of a price ceiling or maybe relatively higher because they also pay sellers certain amount to evade the law of price ceiling.
2) A buffer stock is a stock which is stored for the times when there will be a shortage in the economy. and when later this product is sold from the storage a price floor is set so that the commodity can be sold at lowest legal price. Price floor is used by the government to prevent prices from being too low.
3) No substitute goods: In monopoly the firms sell a good for which there is no close substitutes.
Legal Barriers: They have the exclusive rights to produce a particular product, exclusive control to the materials used in the production of goods.
Technological Superiority: They are able to acquire the best possible technology while producing goods effectively.
Economies of Scale: when the product is made in bulk there is a decreased unit cost.