01:220:103 Chapter Notes - Chapter 4: Capital Loss, Price Ceiling, Shortage
1 Jul 2016
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When quantity supplied & quantity demanded differ, the short side of the market (smaller quantity), will prevail. Shortage: excess demand not eliminated by a rise in price. A price ceiling creates a shortage & increase the time & trouble required to buy the good while the price decreases, cost could rise. Black market: market where goods are sold illegally at a price above the legal ceiling. Rent controls: government imposed max rents on apartments and comes. (price ceiling). Price floor: government imposed minimum price in market. Surplus: excess supply not eliminated by fall in price. A price floor creates surplus of a good. In order to maintain the price floor, government has to prevent surplus from driving down the market price. Often times the government will purchase the surplus itself. A tax collected from sellers hifts the supply curve upward by the amount of the tax.
