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Canada (161,966)
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ECON 101 (172)
Chapter 5

Economics 101 chapter 5 notes.docx

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Department
Economics
Course
ECON 101
Professor
Robert Gateman
Semester
Fall

Description
Economics101Chapter5TheInteractionAmongMarketsNomarketorindustryexistsinisolationfromtheeconomysmanyothermarketsAchangeinonewillcausechangesinothersFeedbacktheinducedchangesintheseothermarketswillleadtochangesinthefirstmarketPartialequilibriumanalysisanalysisofasinglemarketinisolationignoringanyfeedbacksthatmaycomefrominducedchangesinothermarketsIfaspecificmarketisquitesmallrelativetotheentireeconomychangesinthemarketwillhaverelativelysmalleffectsonothermarketsThefeedbackeffectsontheoriginalmarketwillinturnbeevensmallerPartialequilibriumanalysiscansuccessfullybeusedtoanalyzetheoriginalmarketGeneralequilibriumanalysisthestudyofhowallmarketsfunctiontogethertakingintoaccountthevariousrelationshipsandfeedbackeffectsamongindividualmarketsGovernmentControlledPricesGovernmentsfixthepriceatwhichaproductmustbeboughtandsoldindomesticmarketsGovernmentpricesattempttoholdpriceatdisequilibriumvalueSomeholdpricebelowequilibriumvaluecreatingashortageatcontrolledpriceDisequilibriumPricesWhatdeterminesthequantityactuallyexchangedVoluntarymarkettransactionneedsawillingbuyerandsellerIfquantitydemandedinlessthanquantitysupplieddemandwilldetermineamountactuallyexchangedandsurplusremainswithunsuccessfulsellersIfquantitydemandedisgreaterthanquantitysuppliedsupplywilldeterminequantityexchangedisdeterminedbythelesserofquantitydemandedorquantitysuppliedPriceFloorsMinimumpermissiblepricethatcanbechargedforagoodorserviceApricefloorsetbeloworatequilibriumpricehasnoeffectbecausefreemarketequilibriumisattainableIfpricefloorissetaboveequilibriumpriceitwillraisethepriceandthereforemakeitbindingAgovernmentmayestablishapricefloorbyguaranteeingacertainpricebybuyinganyexcesssupply
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