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ECON 200 (142)
Lecture

Ch6.pdf

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Department
Economics
Course
ECON 200
Professor
Robert Schwab
Semester
Spring

Description
Ch6 Thursday,February 20,2014 12:31 AM Price Ceiling When the government imposes a binding price ceiling on a competitive market, a shortage of the good arises, and sellers must ration the scarce goods among the large number of potential buyers. The rationing mechanisms that develop under price ceilings are rarely desirable.Long lines are inefficient because they waste buyers'time.Discrimination according to seller bias is both inefficient (because the good does not necessarily go to the buyer who values it most highly) and potentially unfair. By contrast,the rationing mechanism in a free,competitive market is both efficient and impersonal. When the market for ice cream reaches its equilibrium,anyone who wants to pay the market price can get a cone.Free markets ration goods with prices. --- Price Floor In the case of a price
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