What is Price?
Price is how much it costs to purchase a good/service.
Importance of Price
Holding supply equal, price is a measurement of demand. The higher the demand, the higher the price is bid up. When the price increases, fewer people want to buy it. The only people willing to buy it at the elevated price are the people who want it the most. I.E. The person willing to pay 100 dollars for a pen wants it more than the person who is only willing to pay 50 cents for that same pen. Therefore, the price system will always direct goods/services towards the person who wants it the most. This is assuming that the potential purchasers’ income levels are not the limiting factor in purchasing decisions.
In the other direction, the lower the demand, the lower the price of the good/service. When the price decreases, more people want to buy it. I.E. If a watch is marked 25% off, more people will buy it because of the good deal. The price system therefore causes more people to have the product. In both directions, the effect of price is to cause supply to equal demand.
What are Price Controls?
Price controls are restrictions on the free movement of price. They can take the form of price floors or price ceilings.
What is a Price Floor?
A price floor is a minimum price that is allowed to be charged for a product. For example: the minimum wage is an example of a price floor.
Effect of a Price Floor
The effect of a price floor is to cause excess supply. By preventing price from falling past a certain number, supply will be held over demand. In the case of a minimum price for the cost of labor, fewer people will purchase labor.
What is a Price Ceiling?
A price floor is a maximum price that is allowed to be charged for a product. For example: President Nixon imposed a price ceiling on the cost of gasoline.
Effects of a Price Ceiling
The effect of a price ceiling is to cause excess demand. Another way of saying that is that it will cause supply shortages. By preventing price from rising past a certain number, demand will be held over supply. More people will want it than is available to provide. The price ceiling means that people can’t complete for the scarce good by bidding up the price. Thus the only way to compete is by spending time. As a result of President Nixon’s price ceiling on gasoline, there were massive lines at the gasoline pumps that lasted many hours. Many people who wanted gasoline couldn’t get it.
|Rate||Assets Under Management|
|1.00%||Between $125,000 and $750,000|
|.85%||Between $750,000 and $1,250,000|
|.80%||Between $1,250,000 and $1,750,000|
|.75%||Between $1,750,000 and $2,500,000|
|.70%||Between $2,500,000 and $3,250,000|
|.65%||Between $3,250,000 and $4,250,000|
A single rate is applied to the entire account. So a person with a $750,000.01 account pays less than a person with a $750,000 account. I will waive personal tax return fees for accounts over $1 million. For accounts that are above $5,250,000, we’ll need to discuss a custom rate.
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Questions for the comments
Did my explanation make sense? Do you agree or disagree with what I said?