Question
In: Economics
Give example of a factor-price distortion in LDCs? Explain how it impacts their economic growth.
Give example of a factor-price distortion in LDCs? Explain how it impacts their economic growth.
Solutions
Expert Solution
The factor price distortion means deviations of the listed price
or predefined price with the present price of the market
participants which were trading for the conventional way of risk
return optimization.
The basic examples of market price distortions are price floors and
price ceilings.
Price floor is the price which is in the favour of producers and it
is decided above the equilibrium price.
Price ceiling is the price which is in the favour of consumers and
it is decided below the equilibrium price.
In the LDCs (Least Developed Countries) price distortion is very
important because of the following reasons:
In the least developed countries the price distortion plays an
important role in the regulating the market conditions.
In the LDCs price distortion increases the economic growth because
it reduces the market risk.
In the LDCs the economic resources are very less so it is important
to use these resources in an optimum way for maximum output.
It helps to increase the dominance of the sellers in the
market.
It helps to increase the control of the market price.
It is also helpful in the grading of the products.
It is also helpful in the price fixation of innovative
products.
Rahul Sunny answered 7 months agoRelated Solutions
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