Introduction
The market equilibrium is the price point where the demand and supply of a product or service in an economy intersect. When the demand for a product increases, its price will rise too, and when its supply increases, the price of the product falls. This article will discuss which of the following items keeps prices below equilibrium: government intervention, monopolies, and market fluctuations.
Government Intervention
Government intervention is one of the most common ways to keep prices below equilibrium. This often happens when the government imposes price controls, which limit the price of a product or service by legislation. This can be done to protect consumers from being charged too much for basic goods or services, or to protect certain industries from competition. Price controls can also be used by governments to prevent producers from overcharging customers, which can lead to inflation.
Monopolies
Monopolies can also keep prices below equilibrium. A monopoly is a market structure in which a single seller or producer controls the majority of the market and sets prices for the product or service. This limits competition and can lead to lower prices as a result. However, monopolies are a form of market failure, as they limit consumer choice and negatively impact the efficiency of the economy.
Market Fluctuations
Market fluctuations, or changes in the market price, can also keep prices below equilibrium. This often happens when there is a sudden decrease in demand for a product or service. In such cases, suppliers often lower their prices in an attempt to attract more customers. This can also lead to prices staying below equilibrium for a period of time.
Conclusion
In conclusion, government intervention, monopolies, and market fluctuations can all keep prices below equilibrium. Government intervention is the most common way to keep prices below equilibrium, as the government can impose price controls to protect consumers from being charged too much for basic goods or services. Monopolies can also keep prices below equilibrium, though they are a form of market failure. Finally, market fluctuations can also lead to prices staying below equilibrium for a period of time.