ECON 110 Chapter Notes - Chapter 5: Price Ceiling, Price Floor, Black Market

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24 Dec 2016
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ECON 110 Full Course Notes
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ECON 110 Full Course Notes
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An advance that reduced the cost of extracting natural gas would affect other markets: this increases the demand for all goods and services used for extraction, processing, etc. The prices for such goods rise: this also increases the demand by natural-gas firms for labour. Firms with similar workers have to pay higher wages to retain their workers. There would also be a direct effect on consumers: the reduction of the natural-gas equilibrium price generates substitution away from other fuels. The reduction in demand for the other products causes prices of substitutes to be pushed down. Producers of the substitutes would devote fewer resources to their production. No market or industry exists in isolation from the economy"s many other markets. A change in one market leads to changes in many other markets: the resulting changes in other markets leads to changes (feedback) in the first market.

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