ECN 104 Lecture Notes - Lecture 3: Price Floor, Allocative Efficiency, Market Clearing

• School: Ryerson University
• Department: Economics
• Course: ECN 104
• Professor: Frank Trimnell

Document Summary

Learning objectives after reading this chapter, students should be able to: describe demand and explain how it can change, describe supply and explain how it can change, relate how supply and demand interact to determine market equilibrium. Identify what government-set prices are and how they can cause product surpluses and shortages. (appendix) illustrate how supply and demand analysis can provide insights on actual economy situations. 2. standardized goods: prices that are discovered through the interaction of buyers and sellers. No individual can dictate the market price: the goal of the chapter is to explain the way in which markets adjust to changes and the role of prices in bringing the markets toward equilibrium. Illustrates the inverse relationship between price and quantity (see corn example, figure. 3. 1): the downward slope indicates lower quantity (horizontal axis) at higher price (vertical axis), higher quantity at lower price, reflecting the law of demand.