To whom it may concern,
Living in the United States, I already knew a lot about Market Price before we started this unit. I knew that the supply and demand had to meet perfectly in the middle for that to determine market price, or the market equilibrium. What I didn't know about was price floors and ceilings, which is where the government comes in and places the market price either above (floor) or below (ceiling) the regular market price to control the economy and keep it going steady. That was probably the only thing that I wasn't familiar about when it comes to market price in this unit. One question I would have is, is there anything else like floors or ceilings that we didn't learn about? And do consumers ever get angry at the floors and ceilings that the government places?
Here we go real life examples. As you know, I work in the student store, so I have to set the prices for all the snacks there. I need to find a good market clearing price for all our products. It needs to match the demand of the customers and we need to supply the correct amount as well. Classic example of market price. One real world example of a price floor is a minimum wage job. The government purposefully places the market price (minimum wage) higher, so they can bring in more profit, and so businesses have to pay you that amount, and no less. An example of a price ceiling is a rent control apartment in New York. Obviously if the government wouldn't lower the market clearing price, then only about 1% of the population could live there because it's so expensive. So the government lowers the price so that more people can live there. However, then the demand for those apartments rises, which creates another problem.
As you can see, market price is a fairly simple idea, but it can come with some complicated examples. But we will always need it to run the economy though!
