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Lecture

chapter 4,5,6,7 All of these chapters discussed in the lectures are summarised into a very concise lecture which is easy to understand and go over.

8 Pages
115 Views

Department
Economics
Course Code
ECON 101
Professor
Emanuel Carvalho

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Description
October 8 2010 Applications of Market DemandMaximum Price LegislationMinimum Price Legislation Maximum Price LegislationMarket price is legally allowed to fall below but not legally allowed to exceed the maximum price o This protects the consumer o However the governments creation of a maximum price creates excess demand in the marketAt the maximum price Pm refer to notes the quantity demanded qd exceeds the quantity supplied qsResultExcess demand shortageGiven the excess demand alternative measures to allocate the outlet are introduced 1 Lottery1 ineffective though everybody has a chance not everybody can get it 2 LevelList 3 Seller preferences1 favoritism can arise regular customers family members friends of seller will generally receive the units of commodity 2 Can lead to discrimination 3 Can result in bribery ie you can get units of this commodity if you buy units of this commodity that is not selling well known as tiein sales bribery4 Rationing 1 Essentially government takes over2 Coupons are given out total amount of coupons should equal QS or their maximum price legislation 3 Fairest method as those who are in need of a commodity are likely to receive it Rental Market Refer to notesSetting a maximum price legislation creates a shortageThus government will create lowincome housing Effects of a Maximum Price and the Black Market
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