ECO100Y5 Chapter Notes - Chapter 5: Shortage, Price Floor, Economic Surplus
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ECO100Y5 Full Course Notes
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Change in one market leads to changes in other markets: no market/industry is isolated from economy"s many other markets. Induced changes in other markets, lead to changes in first market. Partial-equilibrium analysis; analysis of single market in isolation, ignoring any feedbacks that may come from changes in other markets: used when specific market is small relative to entire economy, resulting in small feedback. General-equilibrium analysis; analysis of all economy"s markets simultaneously, including interactions among other markets: study of how all markets function together, account various relationships and feedback effects among each market. Attempt to hold price at some disequilibrium value: some undervalue, result in shortage, some overvalued, result in surplus. Disequilibrium prices: if qd is less than qs, demand will determine amount exchanged, if qd is more than qs, supply will determine amount exchanged, quantity exchanged determined by lesser of qd or qs (short-side rule)
