Production of Chicken Nuggets Coursework - 550 Words

Production of Chicken Nuggets Coursework (Coursework Sample) Content: Effects of low price ceiling and increased tax on production of chicken nuggetsLow price ceilings imply that Charlize will set the price of chicken nuggets below the equilibrium price. Equilibrium prices are those that allow the markets to clear, that is, produces sell all their wares without remaining with surpluses and consumers meet their demand fully.Equilibrium price is actually the meeting point of the forces of demand and supply. Setting a price lower than the equilibrium implies that the market will not clear. The supply of normal goods increase as their prices increase, hence,the low price will discourage producers of chicken nuggets because the venture will not be viable. They consequently move out of producing chicken nuggets reducing their supply in the market. At the low price, consumers will demand more chicken but because producers have cut supply, there will be excess demand. Because of the high demand and shortage of the commodity brought about by leg al constraints, the chicken will be hoarded and sold in black markets.PriceQuantity of chicken nuggetThe graph above shows a shortage how a low price ceiling produces a shortage of chicken nuggetsImposing a large tax on the producers of chicken nuggets will also discourage their production, albeit, short-lived. Initially, the producers will shoulder the tax; hence, the initial tax incidence falls on them. Later increase prices for this commodity. Chicken nuggets, being a good of ostentation, have a constant demand despite increase in prices.Their demand is insensitive to changes in prices. Because of increase in the prices, producers will supply more chicken. The burden of tax, for that matter, shifts to the consumers. The long run effect of taxation can be counter reactive because it can increase supply of the commodity since supply is elastic. Production will increase due to an increase in price.Quantity of chicken nuggetsPrice