CAS EC 101 Lecture Notes - Lecture 4: Price Floor, Economic Equilibrium
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Isaac bookbinder: equilibrium a. the point where qs = qd, e is like a magnet b. i. Ex: surplus: the quantity demanded is less than supplied b. i. 1. This will make firms cut prices, returns graph to e b. ii. If price is too high or low, the market will adjust based on supply and demand which forces companies to make changes: floors and ceilings, price floor a. i. Binding price floor: when a price floor is set above the equilibrium price: price ceiling b. i. Binding brice ceiling: when the ceiling is below equilibrium price b. iv. Always leads to shortages: history of federal minimum wage, first implemented in 1933 at 25 cents/hr a. i. Declared unconstitutional in 1935 by supreme court a. i. 1. Overturned in 1938 as being constitutional: raised in 2007 to . 25/hr b. i. Between federal and state minimum wages, the highest always applies to businesses b. ii. 2. Some cities have minimum wages: a surplus in the labor market is unemployment c. i.