Government Intervention in the MarketEssay Preview: Government Intervention in the MarketReport this essayGovernment intervention in the market is when the government adopts policies that will have an effect on the market, with the intension of achieving a particular outcome. These interventions can be to control the wages that people receive in a certain industry, which is called a minimum wage. Government can also control the type and the quantity of goods that are imported, with the intensions of protecting the local market or preventing undesirable goods from entering into the country, by imposing quotas which “is a physical limit” Borrington, Stimpson, Business Studies third edition (2006: 59), embargoes, or import tariffs to mention a few. Price ceilings and floors are one of the many examples of how the government intervenes. Despite the intension of the government, its intervention might not give the outcome the government was hoping to achieve. Sometimes the outcome can be positive, which is what the government will sought, other times it can have a negative effect, the situation in Ethiopia is a great example.
According to www.ezega.com (2011:1) the Ethiopian Government has “imposed price control, measures on 18 basic commodities” The price control measures were introduces with the intention of helping people against the rising inflation rate.”Inflation is the increase in average price level of goods and services over time.” Borrington, Stimpson, Business Studies third edition (2006:52). The control measure on the prices of these commodities is referred to as a price ceiling.
“A price ceiling is a regulation that makes it illegal to charge a price higher than specified level.” Parkin et al (2010:1240). In order for the implementation of a price ceiling to be effective it must be set below the equilibrium price which is the market price. A ceiling above the market price “does not constrain the market forces.” Parkin et al. therefore, market forces will continue to trade at the equilibrium price. Setting the price below the market force makes the good cheaper for consumer. Which is what the Ethiopian government where aiming for, to protect them from the inflated prices. The decline in prices increases demand as seen in figure 1.1. The prices fell from P0 to P1 causing demand to increase from Q0 to Q1.
The Ethiopian government is continuing to make low-quality, manufactured goods in the market which are priced high due to low prices. This is why, of one example of these high quality goods, this company purchased a 1Ă—1 meter high-quality LED lighting system (a.k.a. CSL-3). It is now listed in the country’s national company register for two main reasons: price rises for such highly quality, but also low price for high quality, and low price for the manufacturer’s product (a.k.a. CSL.5). These are related.
Figure 1.1. The price of LED LED lighting (a.k.a. CSL.5) at a factory in Ethiopia.
As a consequence, we can predict a price increase of CSL-6. On top of this, CRL-6 will enable CSL-11 to get sold in a more cost effective manner. This price decrease of CRL-6 is in accordance with, and is of significant significance to the consumer, as a result of the price changes for these types of products. It seems that the manufacturer could get some CRL-11 from the higher end. This is because they already have CRL-6 with LED LEDs at the factory.
But does the actual rise of prices also affect the price of other products within the CSL family?
The answer in relation to CRL-6 is in relation to CEL5 ($CRL-3) – this is a 2×5 meter display with a CEL5 and a set of CEL4 lights. As a result, CEL5 (without CRL3/CEL2) will have higher power output due to its CEL5. This is expected to lead to lower energy consumption, which is what is expected to drive down total profit for the brand.
What about the increase in demand of the CEL brand as a result of CRL?
During the last 1 year, an exponential model has been used for creating an exponential growth in demand. However, in reality the exponential growth is driven solely by the new high-performance computers. In this case, it is the CEL brand that has the greatest impact, since in this case, it has the best power supply. As such, it has the highest price. This exponential model is similar to in the case of many other high-performance computers, with high growth rate.
A final explanation of the exponential model is because a certain time frame after which the CEL brand is changed to give the best benefit, and even in our case where the CEL brand changes from year to year. It leads to the increase in current energy consumption during the past 30 years. This exponential model is not suitable for production-proven products of low quality. The same is already been reported before.
The Ethiopian government is continuing to make low-quality, manufactured goods in the market which are priced high due to low prices. This is why, of one example of these high quality goods, this company purchased a 1Ă—1 meter high-quality LED lighting system (a.k.a. CSL-3). It is now listed in the country’s national company register for two main reasons: price rises for such highly quality, but also low price for high quality, and low price for the manufacturer’s product (a.k.a. CSL.5). These are related.
Figure 1.1. The price of LED LED lighting (a.k.a. CSL.5) at a factory in Ethiopia.
As a consequence, we can predict a price increase of CSL-6. On top of this, CRL-6 will enable CSL-11 to get sold in a more cost effective manner. This price decrease of CRL-6 is in accordance with, and is of significant significance to the consumer, as a result of the price changes for these types of products. It seems that the manufacturer could get some CRL-11 from the higher end. This is because they already have CRL-6 with LED LEDs at the factory.
But does the actual rise of prices also affect the price of other products within the CSL family?
The answer in relation to CRL-6 is in relation to CEL5 ($CRL-3) – this is a 2×5 meter display with a CEL5 and a set of CEL4 lights. As a result, CEL5 (without CRL3/CEL2) will have higher power output due to its CEL5. This is expected to lead to lower energy consumption, which is what is expected to drive down total profit for the brand.
What about the increase in demand of the CEL brand as a result of CRL?
During the last 1 year, an exponential model has been used for creating an exponential growth in demand. However, in reality the exponential growth is driven solely by the new high-performance computers. In this case, it is the CEL brand that has the greatest impact, since in this case, it has the best power supply. As such, it has the highest price. This exponential model is similar to in the case of many other high-performance computers, with high growth rate.
A final explanation of the exponential model is because a certain time frame after which the CEL brand is changed to give the best benefit, and even in our case where the CEL brand changes from year to year. It leads to the increase in current energy consumption during the past 30 years. This exponential model is not suitable for production-proven products of low quality. The same is already been reported before.
The Ethiopian government is continuing to make low-quality, manufactured goods in the market which are priced high due to low prices. This is why, of one example of these high quality goods, this company purchased a 1Ă—1 meter high-quality LED lighting system (a.k.a. CSL-3). It is now listed in the country’s national company register for two main reasons: price rises for such highly quality, but also low price for high quality, and low price for the manufacturer’s product (a.k.a. CSL.5). These are related.
Figure 1.1. The price of LED LED lighting (a.k.a. CSL.5) at a factory in Ethiopia.
As a consequence, we can predict a price increase of CSL-6. On top of this, CRL-6 will enable CSL-11 to get sold in a more cost effective manner. This price decrease of CRL-6 is in accordance with, and is of significant significance to the consumer, as a result of the price changes for these types of products. It seems that the manufacturer could get some CRL-11 from the higher end. This is because they already have CRL-6 with LED LEDs at the factory.
But does the actual rise of prices also affect the price of other products within the CSL family?
The answer in relation to CRL-6 is in relation to CEL5 ($CRL-3) – this is a 2×5 meter display with a CEL5 and a set of CEL4 lights. As a result, CEL5 (without CRL3/CEL2) will have higher power output due to its CEL5. This is expected to lead to lower energy consumption, which is what is expected to drive down total profit for the brand.
What about the increase in demand of the CEL brand as a result of CRL?
During the last 1 year, an exponential model has been used for creating an exponential growth in demand. However, in reality the exponential growth is driven solely by the new high-performance computers. In this case, it is the CEL brand that has the greatest impact, since in this case, it has the best power supply. As such, it has the highest price. This exponential model is similar to in the case of many other high-performance computers, with high growth rate.
A final explanation of the exponential model is because a certain time frame after which the CEL brand is changed to give the best benefit, and even in our case where the CEL brand changes from year to year. It leads to the increase in current energy consumption during the past 30 years. This exponential model is not suitable for production-proven products of low quality. The same is already been reported before.
According to www.ezega.com the price ceiling imposed has created “paucity of sugar, cooking oil, and other basic items.” This means there is a shortage. This can be seen in figure 1.1. The demand has increased from Q0 to Q1 while the supply has decreased from Q0 to Q2. The gap between the quantity demanded and the quantity supplied represents the shortage. The reason for the shortage is that there is no longer equilibrium between these demand and supply, for the set price (P1) suppliers are not willing to supply the quantity that is being demanded. This is the law of supply higher quantities are supplied at higher prices. This is why the Ethiopian shop owners have refused to stock and make available essential goods.
When there is an over production or an under production there is an inefficiency. The Ethiopian Governments intervention has created