Price Controls applied by the Qatar Government - Literature review Example

? Price Controls applied by the Qatar Government Price Controls applied by the Qatar Government Mining and extracting natural gas and petroleum, makes up for approximately sixty percent of Qatar's Gross Domestic Product, ninety percent of entire products export income and approximately seventy percent of government incomes. Qatar Petroleum is accountable for all gas and oil business processes, entailing drilling and exploration for hydrocarbon, natural gas, oil, together with for transport, production, trading, refining, distribution, storage, export and sale of such things and of any of their byproducts plus derivatives . Agriculture is also a vital sector in the Qatar economy because of the objective of Qatar, which is food security. Qatar is a main importer of agricultural goods. The objective of food security is possible mostly through low customs tariffs. The Qatar government retains price controls on natural gas and petroleum. Qatar also sustains price controls on other manufactured products, like cement. Price Floors regards the minimum prices put by the government for particular goods and services, which it considers producers to be trading in an unjust market with very low prices, and hence such producers, need some assistance. Price floors become a problem when the government puts them higher than the equilibrium price. Once the prices are higher than the market price, there is likelihood that there will be a surplus or excess supply. In case this takes place, producers who cannot predict difficulty ahead will make the bigger quantity where the new price crosses their supply curve (Wessels, 2006). Clients will not purchase that many products at the higher price and so those products will end up unsold. There could be a serious economic depression if producers notice that there is insufficient demand, and in reaction reduces production. There exists deadweight loss linked with this decrease in quantity, mirrored in the loss of producer and customer surplus at lesser points of production. This policy can be of benefit to the producers, although only if they have elastic supply curve and thus they do not have any net loss. This type of government does not favor the consumers. They are the losers, as they pay high prices and the certain prices drives some out of the market, as they cannot afford the products. There are many policies of the government for putting up a price floor and handling its consequences. They may put an easy price floor, put production quotas or employ a price support. In Price supports, the government puts a minimum price, and then purchases all the surplus or excess supply (Carbaugh, 2011). This is normally more incompetent and expensive for the government and community as a whole than for the government to subsidize the firms concerned. Either the Production quotas increase the price by limiting production using authorized quotas or giving firms incentives to decrease their production. In Qatar, for instance, the government applies these techniques extensively with oil and agriculture. The government compensates the farmers to maintain some parts of their lands uncultivated, hence increasing prices. This policy would be more competent and less expensive to community if the government subsidized the producers straightly rather than putting a production limit. Price Surplus Supply PF PE Demand QD QE Qs Quantity QD-Quantity demanded QE-Equilibrium quantity QS-Quantity supplied PE-Equilibrium price PF- The floor price set Price ceilings Price Ceilings regards maximum prices put by the government for certain products and services, which they consider are being traded at a very high price, and hence clients require some assistance buying them. Price ceilings are an issue once the government set it under the market equilibrium price. Once the government sets the ceiling under the market equilibrium price, there will be supply shortage or surplus. The Producers will not generate as much at the lesser price, while clients will need more since the products are very cheap. Demand will exceed supply, and hence, there will be many people wishing to purchase at this lesser price but cannot. In case the demand curve is elastic, then the impact to customer surplus will be a positive impact. The prices awfully harm the producers, and there is a decrease in the number of producers willing to take that lesser price and those who stay in the market have to take a lesser price. The consequential shortage of products could cause clients to wait in line to get the product, government quotas, as well as even the commencement of a black market handling the products scarcity. Price Supply PE PC Shortage Demand Qs QE QD Quantity QS-Quantity supplied PC-Ceiling price PE-Equilibrium price QE-Equilibrium quantity QD-Quantity demanded Conclusions A Price Ceiling concerns a government-set maximum price payable for a product. It is different from a price floor in that the former prevents the over escalating of prices , a situation that in theory enables customers to manage to pay for the product or service, although could consequently lead to scarcities and rationing. A price floor prevents prices from lessening too low, which can defend producers, although can cause surplus and waste. Imposing the maximum prices will defend clients from exploitation since prices cannot increase above a particular limit. This way the clients buy product at lesser prices. Imposing the price bound above a particular point will assist the producers to raise their production earnings. The government mainly use Price floor in the agricultural sectors to guard the farmers from exploitation. The Price control removes operation expenses in production. This is possible by minimizing the charge incurred in carrying out business among the corporations hence removing the avoidable expenses in production. Price control raises clearness in pricing of merchandise. Government normally put the minimum or maximum prices for a product thus creating alertness in the economy on the prices of various products. Price controls normally remove the ambiguity caused by the variation in the exchange rates. Forming a worldwide currency in a business alliance will remove the ambiguity caused by exchange rates dissimilarities. Recommendations The government should commence the hard job of amending rations to mirror varying demands and supplies in addition to the wants of personal clients. For instance, the government could give people with a time-consuming commute to workplace a bigger ration of petrol. The government can solve issues of rationing by allowing an open market in allotment tickets. The liberated exchange of allotment tickets has the benefit of giving extra income for clients who vend their additional tickets and enhancing the happiness of those who purchase. A market full of allotment tickets, nevertheless, does nothing to support further production. Such a market does not automatically remove regional shortages. References Carbaugh, R. J. Carbaugh,2011). Contemporary economics: An applications approach. Armonk, N.Y: M.E. Sharpe. Wessels, W. J. Carbaugh,2006). Economics. Hauppauge, N.Y: Barron's. Read More