ECON 208 Chapter Notes - Chapter 5: Demand Curve, Deadweight Loss, Efficient-Market Hypothesis
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ECON 208 Full Course Notes
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Changes in one market affect other markets (feedback) Partial-equilibrium analysis: analysis of a single market in isolation, ignoring any feedbacks that may come from induced changes in other markets. General-equilibrium analysis: analysis of all the economy"s markets simultaneously, recognizing different markets" interactions. Small markets won"t cause major effects on other markets (use partial analysis) Governments sometimes fix the price that a product must be sold/bought in the domestic market (i. e. ma water crisis in boston, may 2010) In free markets: equilibrium price equates quantity demanded and quantity supplied. Government price controls are policies that attempt to hold the price at a disequilibrium value. Some controls hold the market price below its equilibrium value to create a shortage at the controlled price. Some controls hold the market price above its equilibrium value to create a surplus at the controlled price. Determining is irrelevant in a free market because supply/demand are self- regulating.