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Destabilizing speculation:

When suppliers and demanders believe that a change in price expectations similar changes to come, speculation will tend to have a destabilizing effect on price fluctuations.

For example, an increase in demand is the reason why the price does rise. In the graph, demand curve has moved from D1 to D2, price has risen from P1 to P2. In this time, price have tend to rise, suppliers want to wait until the price rise further. Thus, supply moves from S1 to S2. In contrast with suppliers, demanders buy now before a rise in price is higher. Demand move from D2 to D3 and price rise to P3. www.51lunwen.org/newzealandassignment

MARKETS WHERE PRICES ARE CONTROLLED

Equilibrium means a state fair or a state of balance between market demand and supply. Without a change in demand and / or would provide no change in market value. In the diagram above, demand and supply at price P1 is equal. At any price above P1, supply exceeds demand and at a price below P1, demand exceeded supply. In other words, the price where supply and demand are out of balance points is called disequilibrium. (Jacks,John,2007, p57)

Changes in the conditions of demand or supply changes on demand or supply curves . This will cause changes in the equilibrium price and quantity in the market

Price floor is a legal minimum on the price at which a good can be sold.

Price ceiling is a legal maximum on the price at which a good can be sold.

Minimum Price ( Price floor):

An ineffective price floor, below equilibrium price. A price floor can be set above the free-market equilibrium price. In the graph above, price floor set below the free-market price. In this case, the floor has no practical effect. The government has mandated a minimum price, but the market already bears a higher price.

An effective price floor, causing a surplus (supply exceeds demand). Conversely, in the graph Monday, dashed green line represents a price floor placed on the free market price. In this case, the floor price is a measurable impact on the market. It sure prices stay high for the product can continue to be made. (Jackson, John, 2007, p84)

Effect on the market

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