ECON 1000 Lecture Notes - Lecture 7: Price Ceiling, Invisible Hand, Price Floor
2 Oct 2015
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ECON 1000 Full Course Notes
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Econ1000 lecture 7 efficiency and equity & government action in markets. The cost of one more unit of a good/service is its marginal cost, which we can measure as minimum price that a firm is willing to accept. A supply curve of a good/service shows the quantity supplied at each price. A supply curve also shows the minimum price that producers are willing to accept at each quantity. Producer surplus is the price of a good minus the marginal cost of producing it, summed over the quantity sold. The invisible hand: adam smith"s invisible hand idea in the wealth of nations implied that competitive markets send resources to their highest valued used in society, consumers and producers pursue their own self-interest and interact in markets. Obstacles to efficiency: price ceilings and floors, taxes, subsidies, and quotas, monopoly, public goods, external costs and external benefits. Objectives: price ceilings case of rent control, price floor case of minimum wage laws, taxes.
