ECON 200 Lecture Notes - Lecture 13: Price Floor, Price Controls, Price Ceiling
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ECON 200 Full Course Notes
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Document Summary
Cross-price elasticity of demand measures how the quantity demanded of one good responds to a change in the price of another good. Price elasticity of supply measures how much the quantity supplied responds to changes in the price. Supply of a good is said to be elastic if the quantity supplied responds substantially to changes in the price. Supply is said to be inelastic if the quantity supplied responds only slightly to changes in the price. A key determinant of the price elasticity of supply is the time period being considered. Supply is usually more elastic in the long run than in the short run. Price controls are usually enacted when policymakers believe that the market price of a good or service is unfair to buyers or sellers. Price ceiling - a legal maximum on the price at which a good can be sold (for buyers)