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Supplemental Notes ECON-UA2 4.0 GPA Student

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Maharukh Bhiladwalla

Competitive Statics: - Where we change one or more exogenous variables and observe the impact on out endogenous variables. -Suppliers only care about people's income because they can try to charge more for gas. So, rise in income causes price and quantity to go up. -When you look at the change of exogenous variables and how it affects/changes the endogenous variables. Government Intervention- Why would governments want to intervene in a market? 1. A market failure and the only way it can work well, is if the government gets involved. -We are going to be looking at situations where the government intervenes just because they don't like how it is running and wants to change the market price. (Too high or too low). -There are 2 ways you can change the market price. 1. Fight the market and force them to have a different price. 2. Manipulate the market and using taxes or subsidies. Ways in which the government fights the market. 1. The case of the Price Floor- Where we feel the price is viewed as "Too Low". -A price floor is a price below the product- the prices for a product are not allowed to drop below the floor. (Minimum price for product). Ex: Farm Policy. 2 problems that farmers face- 1. Short Run: Unstable weather (Look at graph). -Governments may intervene with farmers so they can stabilize their income--with how much it fluctuates. 2. Long Run: Technological change. -The price in the markets have fallen because big corporations are using the technological advances for less price on every product, so the small family corporations (that aren't using the new technology) have to sell their products for the same low price--so they end up losing from this advance. What to do about the surplus? 1. Government can buy it and give it to poor countries. This is a very harmful thing to do because that outs the farmers in those countries to lose money. -If we really wanted to help them, we would give them the money so they could spend it freely. -So instead, the government buys it up and stores it. This gets expensive because the huge storage containers cost billions of dollars. 2. Artificially shift the demand curve to the right. "Got Milk?" as an example. Ex) Food Stamps- saying you "must spend this on food" blocks them from spending it on anything else. 3. Artificially shif
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