ECO101H1 Lecture 8: Lecture8
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ECO101H1 Full Course Notes
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(1) consumers buy only the quantity that they wish to buy at the existing. Principle of voluntary exchange (2)suppliers sell only the quantity that they wish to sell at the existing price price. Implication: if price is not the equilibrium price, then the quantity bought and sold in the market place is the lesser of the quantity demanded and the quantity supplied. [1]in a freely functioning market, price adjusts to equilibrate quantity demanded and quantity supplied. [2]if price cannot play this role, a mechanism other than price- non-price rationing must determine who obtains the quantity supplied [when quantity supplied is less than quantity demanded] [3] first come, rst served is an example of non-price rationing. sometimes when the market price is too high, the government might put a ceiling price. This statement would be true only if the demand curve is perfectly inelastic.
