ECON 101 Chapter Notes - Winter 2018 Chapter 5 - Price ceiling, Price floor, Shortage

• School: UBC
• Department: Economics
• Course: ECON 101
• Professor: ALL

Document Summary

(cid:1838)(cid:1853)(cid:1854)(cid:1867)(cid:1873)(cid:1870) (cid:1839)(cid:1853)(cid:1870)(cid:1863)(cid:1872): (cid:1371)(cid:1830) (cid:1866)(cid:1868)(cid:1873)(cid:1872)(cid:1871) (cid:1372) (cid:1373)(cid:1842) (cid:1866)(cid:1868)(cid:1873)(cid:1872)(cid:1871) General equilibrium: analysis of all markets and interactions simultaneously. Partial equilibrium: analysis of one market in isolation, assuming no spillover/feedback. Disequilibrium price: quantity actually exchanged determined by the lesser number between qd and qs. If a has 5 but b only wants 3, then quantity exchanged is 3. This is known as smaller number value: at disequilibrium price above pe, qd is exchanged, at disequilibrium price below pe, qs is exchanged. Price floor: minimum price, price cannot fall below it. Both buyers and sellers do not care price floor less than pe (equilibrium price) If price floor is higher than pe, the(cid:374) (cid:373)a(cid:396)ket p(cid:396)o(cid:271)le(cid:373)s e(cid:454)(cid:272)ess suppl(cid:455) si(cid:374)(cid:272)e less (cid:395)ua(cid:374)tit(cid:455) is exchanged. Price ceiling: maximum price, price cannot rise above it.