Apple Price Question Essay

Introduction

Price Controls are trading environments created by the government whereby the government regulates the price commodities of particular goods or services in the market by setting specific price brackets within which the selling price of that particular commodity in the market is not supposed to exceed.

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There are different outcomes and implications on the market of a commodity as well as on the economy of the country within which that particular commodity is traded when the government puts in place price controls for that specific commodity policy (Kotabe, Masaaki, and Kristiaan 2014). This paper seeks to explore what would be the implication on the apple market if the government sets a minimum price of $2.00 per apple, as well as what could motivate such a policy.

The Price of $2.00 per apple is higher than the current market price for one apple. Therefore, setting the minimum price at $2.00 would be an increment on the current price. The direct implication, in this case, would be that the demand for apples would decrease due to the increased price. If the government sets the minimum price of one piece of apple at $2.00, the initial price of apples at the firms will increase. Apple farmers would sell their produce at a higher price than they currently do. This would mean that entities that purchase apples from the farmers would acquire them at a higher price and would subsequently take them to the market to sell at a higher price than the current. The change of price would mean less affordability. Therefore the demand for apples would significantly decrease.

Apple Market under the minimum price

The apple market would be significantly affected if the government sets a minimum price above which the market should operate. Due to a rise in prices, fewer people would purchase apples due to factors such as their budgets. The numbers of customers willing to buy apples at the market would go down. A decrease in demand would mean fewer farmers would be in a position to make profits hence a good number of them would be pushed out of business.

On what would probably inform such a policy, the government could have several reasons to implement such a policy. Some of the reasons for price control by the government would be to protect consumer interests, to check inflation, to aid the government in determining minimum wages, to influence the forces of demand and supply as well as protecting the producer by boosting their income. In this particular case, the major reason why the government would put in a price control for apples would be to increase the profits realized by apple farmers. Currently, apple farms are in decline as many former farmers of apples have abandoned the practice due to low prices and also a dwindling demand while the supply remains high. The government could intervene in this situation by regulating the price for apples. The best way to implement this would be raising the minimum price per apple to $2.00.

Currently, the apple market can be termed as well functioning and competitive. However, the imposition of a $2.00 per apple minimum price would harm the current market, as it would reduce the amount of trade in the apple market. Price control for apples would reduce the entrance into the market and reduce the quality of apples availed to the market. Instead of introducing the $2.00 price as a fixed minimum price, the government should introduce a range of price brackets within which the apple market would operate but still leave a reasonable allowance within which the parties in the apple market could work in.

Works Cited

Kotabe, Masaaki, and Kristiaan Helsen. Global marketing management. 2014.

Remillard, Bruno. Statistical methods for financial engineering. Chapman and Hall/CRC, 2016