ECON 101 Lecture Notes - Lecture 9: Deadweight Loss, Price Floor, Economic Equilibrium

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8 Feb 2017
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Discussion 4 (Lec 8-9)
2-7-2017
Binding
o Is the price ceiling/floor binding?
If it prevents us from getting to the equilibrium yes
No ex: price ceiling above equilibrium doesn’t prevent us from getting
to equilibrium point
Deadweight loss lost benefits to society that occurs whenever output differs from
efficient quantity
o CS = A+B
o PS = C
o DWL = D+E
o TNB (total net benefit) = CS + PS = A+B+C
Price floor ex: gov imposes price floor of $7
o CS = A = $450
o PS = B+C+D+E+I = $2450
o Gov expenditure: 400*$7 = $2800
o TNB = CS+PS-Gov expenditure = $100
o Equilibrium = TNB = CS+PS=A+B+D+C+E
o Price floor = TNB = CS +PS-Gov expenditure = A+B+C+D+E+I
(D+E+F+I+H+G) =
A+B+C-F-H-G
Quiz 2 #3 review
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