ECON 101 Lecture Notes - Lecture 6: Linkedin, Regressive Tax, Progressive Tax
Document Summary
Markets for resources and products are closely linked. In the resource market, businesses demand resource, while households supply them. Firms demand resources in order to produce goods and services. Labor market is an important resource market. An increase in the demand for a product will lead to an increase in demand for the resources used to produce it. In contrast, a reduction in the demand for a product will lead to a reduction in the demand of resources to used produce it. An increase in the price of a resource will increase the cost of producing products that use it, shifting their supply curve to the left. A reduction in resource prices will have the opposite effect. A price ceiling establishes a maximum price that sellers are legally permitted to charge. When a price ceiling keeps the price of a good below market equilibrium, there will be both direct and indirect effects.
