ECN 104 Lecture 5: ECN 104 - Lecture 5 - Supply, Demand and Governemt Policy
Document Summary
Ecn 104 lecture 5 supply demand and government policy. Controls on prices: price ceiling : a legal max on the price at which a good can be sold, price floor : a legal min on the price at which a good can be sold. If price ceiling is below the equilibrium then the market price will equal the price ceiling (shortage) If price ceiling is above the equilibrium then the market price will equal the equilibrium price, price ceiling has no affect. If price floor is above the equilibrium then the market price will equal floor price (surplus) If price floor is below the equilibrium then the market price will equal the equilibrium price. Evaluating price controls: prices have a crucial job of balancing supply and demand and thereby coordinating economic activity, price controlled is aimed at helping the poor. Minimum wage laws: yet price control actually affect these people.