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Lecture 9

ECON 1000 Lecture 9: Week 5

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Department
Economics
Course
ECON 1000
Professor
Nick Rowe
Semester
Fall

Description
Econ 1000 – Week 5 – Lecture 9 Price Ceilings (max) and Floors (min) – Chap6  Can’tgo aboveprice maximumor belowprice minimum  Quantityboughtandquantitydemandedare2very differentthings.  Quantitysoldandboughtisquantitysupplied  Q = min { Qs, Qd} “Shortside rule”  Price andquantitydropswhenyouset price maximums  Bigger %change in quantitysuppliedper1% price increase.  Supplycurves tell youhowmuch firms want to sellgiven the amount ofthe price.  If rationingendsupinqueing,allthattime wasted inqueingis just wastedtime.  For price maximums,the quantityactuallyboughtandsoldis equivalenttothequantityofdemand.  Withprice maximums,price dropsgenerallydon’taffect quantity suppliedunlesstheyarepermanentdrops.  Whenwe spendtime andresources‘polishing’ormakinga product standoutcomparedtothecompetition,itcan eitherraisethe price of our productorforce the competitorstodothe same thing. Eventually every competitorwilldothe same thingandsaturatethemarket to the pointthatthis‘polishing’meansnexttonothingto thebuyer.  One way inwhich governmentscan change what happensinmarkets i
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