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Fig. 165 Rationing.


a physical method of allocating a product that is in short supply relative to demand (EXCESS DEMAND). In a free market this situation would not arise - the excess demand would be ‘choked off and additional supply encouraged by an increase in the price of the product (see EQUILIBRIUM MARKET PRICE). But if the price is fixed below its equilibrium rate (for example, by the government wishing to hold down the prices of key products such as food), the use of ration tickets provides one practical means of allocating the available supply between consumers on an equitable basis.

In Fig. 165, for example, if the price of a product is fixed by the government at Or, then it is necessary to ration the amount of output that producers are willing to supply, OQr, at this price amongst consumers who are demanding the greater amount of OQs. See also BLACK MARKET, PRICE CONTROLS.

Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005
References in periodicals archive ?
Non-price rationing is hypothesized asthose farm households who would like to borrow money at the existing interest rates, but financial institutions deny their applicationsor those households who wouldn't like to borrow because of risk aversion and demand depressions.
Consistent with documented Fed attitudes toward Discount Window non-price rationing [see e.g., Mengle, 1986], this cost function indicates that the Fed applies increasing discouragement to repeated as well as current requests.
The optimization problem under uncertainty at date t = q is: where the exogenous variables, ft and dt, refer to the Federal Funds rate and the Discount rate at date t; Bt denotes date t Discount Window borrowing; b, co and c1 are parameters pertaining to the rate of time discount and Fed non-price rationing; and Eq denotes the mathematical expectation conditional upon information available at date q.

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