ECON 101 Chapter Notes - Chapter 5: Price Ceiling, Price Floor, Shortage
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ECON 101 Full Course Notes
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Document Summary
No market or industry exists in isolation from the economy"s many other markets. Feedback change in one market change in multiple markets: assume that the prices of all other goods are constant. Partial equilibrium analysis analysis of a single market in situations in which the feedback effect from other markets are ignored. General equilibrium analysis study all markets together; how events in each market affect all the other markets: how all markets function together taking into account the various relationships and feedback effects. Governments fix the price at which a product must be bought and sold. Government price controls hold the price at some disequilibrium value: when below its eq value, shortage, when above its eq value, surplus. Voluntary market transaction requires both a willing buyer and a willing seller. In diseq, quantity exchanged is determined by the lesser of qs and qd. Binding when it"s set above the eq price.
