ECON 040 Lecture Notes - Lecture 5: Market Power, Economic Equilibrium, Demand Curve

• School: College of The Sequoias
• Department: Economics (ECON)
• Course: ECON 040
• Professor: kasun

Document Summary

Licensing laws: limit the number of sellers. Quotas: limit the amount of a good/service that can be sold. Figure 2. 8 a ban on rice imports raises the price in japan. Implication: a ban on foreign rice will the equilibrium price and reduce the equilibrium quantity. Hint: the answer depends on whether the quota binds (is low enough to affect the equilibrium) S(no quota) s(quota) are derived from solved problem 2. 2. Given d(low), the quota is not binding, and thus has no effect on equilibrium. Given d(high), the quota is binding, and it raises equilibrium price but reduces equilibrium quantity. Policies that cause demand to differ from supply. Suppose everyone is paid the same wage in a labor market. Show the initial equilibrium before the minimum wage is imposed. Draw a horizontal line at the minimum wage, and show how the market equilibrium changes. Large numbers of sellers and buyers, and each seller/buyer is a tiny portion of the market.