Economics 1021A/B Lecture : Topic 4 - Further Application of Supply, Demand & Elasticities.docx

• School: Western University
• Department: Economics
• Course: Economics 1021A/B
• Professor: Arvin Dar

Document Summary

Topic 4: further application of supply, demand & elasticities: introduction, price floors (minimum price, price ceilings (maximum price, incidence of taxes and subsidies, introduction. The idea was that nothing interfered with free market forces. First three section: scenarios without that situation. In this topic, we don"t get that :d: because something is impeding the operation of free market forces (gov"t, regulations) Interventions may be through quantity or through price: the gov"t may say they"re unhappy with the situation and have a quantity intervention. Quota: upper limit on the quantity of a commodity that may be supplied. The supply curve becomes vertical at that quota. Demand and supply meet higher making a higher price. If the new price times the new quantity is higher than the old quantity times the old price, the dairy farmers, for example, benefit. A quota past (to the right of) the equilibrium means nothing. If demand increases, the price gets even higher: price floors (minimum price)