ECON 1000 Lecture Notes - Lecture 10: Utility, Marginal Utility, Demand Curve
2 Nov 2011
School
Department
Course
Professor
10
ECON 1000 Full Course Notes
Verified Note
10 documents
Document Summary
Intervention in markets for farm products takes two main forms. Production quota - an upper limit to the quantity of a good that may produced during a specified period. Subsidy - a payment made by the government to a producer in an attempt to stimulate production more than the market allocates. There is now a new cost which must be considered by the buyers and the sellers. The seller must provide their illegal production for whatever cost. They must also take into take into consideration a new cost: the penalty cost, or cost of breaking the law. The higher the penalty for sellers, the lower the supply will be because not as many people will be willing to provide large quantities when there is so much risk attached. Generally the suppliers are penalized slightly more than the buyers. This extra cost causes the supply curve to shift to the left.
