ECON 2005 Lecture Notes - Lecture 7: Price Ceiling, Price Floor, Economic Equilibrium
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If the demand curve shifts out (demand increases), equilibrium price and quantity will rise. If the demand curve shifts back (demand decreases), equilibrium price and quantity will fall. If the supply curve shifts out (supply increases), equilibrium price will fall but quantity will rise. If the supply curve shifts back (supply decreases), equilibrium price will rise but quantity will fall. Price floors and ceilings: sometimes the government pus limits on the prices that can be charged for things. If the(cid:396)e is so(cid:373)e legal (cid:373)i(cid:374)i(cid:373)u(cid:373) p(cid:396)i(cid:272)e, it is (cid:272)alled a (cid:862)p(cid:396)i(cid:272)e floo(cid:396)(cid:863) Other methods of rationing: market interference: price floors and ceilings are often imposed for (seemingly) good reasons. Auctions: an auction is a market where the e(cid:395)uili(cid:271)(cid:396)iu(cid:373) is (cid:396)ea(cid:272)hed (cid:862)out loud(cid:863) In an american or english auction, the auctioneer attempts to find the maximum price that consumers are willing to pay for a given good.
