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Chapter 6

Chapter 6.docx

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Department
Economics
Course
CAS EC 101
Professor
All Professors
Semester
Winter

Description
Chapter 6: supply, demand, and government policies Controls on prices • How price ceilings affect market outcomes o Price ceiling: price is limited form moving upwards at a certain point o Binding constraint: price ceiling is below the equilibrium price o Lead to rationing mechanisms b/c of shortages • How price floors affect market outcomes o Price floors prevent prices from lowering to a certain point o Binding/non-binding • Evaluating price controls o Economists do not like price floors/ceiling b/c they believe that the market is a good way to organize economic activity Taxes • Tax incidence: how the burden of taxes is distributed among various people who make up the
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