ECON 1 Lecture Notes - Lecture 4: Ronald Coase, Contract, Coase Theorem
Document Summary
Econ1 - introduction to economics - lecture 4: government policies, externalities. The market price moves to the level at which the quantity supplied equals the quantity demanded. But this equilibrium price does not necessarily please either buyers or sellers. Therefore, the government intervenes to regulate prices by imposing price controls, which are legal restrictions on how high or low a market price may go. Price ceiling: maximum price sellers are allowed to charge for a good or service. Price floor: minimum price buyers are required to pay for a good or service. Price ceilings are typically imposed during crises wars, harvest failures, natural disasters because these events often lead to sudden price increases that hurt many people but produce big gains for a lucky few. Federally imposed ceilings on aluminum and steel during wwii. Some market participants benefit from price ceilings.
