ECON 103 Chapter Notes - Chapter 5: Root Mean Square, Natural Disaster, Deadweight Loss
31 May 2018
School
Department
Course
Professor
Saturday, January 27, 2018
Economics Chapter 5
Subject
-In a free market the equilibrium prices depend the quantity demanded with the
quantity supplied. Government price controls are polices that attempt to hold the price
at some disequilbirum value.
-When prices are held below equilibrium value, the quantity traded on the market is
determined by both a buyer and seller.
-At any dis-equilbirum price, quantity exchanged is determined by the lesser of
quantity demanded or quantity supplied.
-For any price below Po, the quantity exchanged will be determined by the supply
curve. For any price above Po the quantity exchanged will be determined by the
demand curve. Thus solid portions of the S and D curves show the actual quantiles
exchanges at different disequlbirum prices.
-Governments sometimes establish a price floor, which is the minimum permissible
price that can be charged for a particular good or service.
-A price floor set below the equilibrium or at will have no effect on the free market
equilibrium because it remains attainable. If a price floor is set higher about the
equilibrium, it will raised the price, in which is it said to be binding.
-Price floors may be established by rules that make it illegal to sell the product below
the prescribed price.
-Binding price floors lead to excess supply. Either an unsold surplus will exist, or
someone usually the government will enter the market and buy the excess supply.
-Price ceilings are the maximum price at which certain goods and services may be
legally exchanges. If a price ceiling is set above the equilibrium price then it has no
affect, but if it is set below the free market equilibrium the price lowers and the thing is
now bidning.
-Binding prices ceilings lead to excess demand, with the quantity exchanged being
less than in the free market equilibrium.
-Sellers Preference: Allocation of products in excess demand and decisions of the
sellers.
!1
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
In a free market the equilibrium prices depend the quantity demanded with the quantity supplied. Government price controls are polices that attempt to hold the price at some disequilbirum value. When prices are held below equilibrium value, the quantity traded on the market is determined by both a buyer and seller. At any dis-equilbirum price, quantity exchanged is determined by the lesser of quantity demanded or quantity supplied. For any price below po, the quantity exchanged will be determined by the supply curve. For any price above po the quantity exchanged will be determined by the demand curve. Thus solid portions of the s and d curves show the actual quantiles exchanges at different disequlbirum prices. Governments sometimes establish a price oor, which is the minimum permissible price that can be charged for a particular good or service. A price oor set below the equilibrium or at will have no effect on the free market equilibrium because it remains attainable.
