Econ102February11 - Econ 102 I. February 11, 2008 Quantity...

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Econ 102 February 11, 2008 I. Quantity Quotas a. Government established maximum number of units sold i. Qq must be below Q* to be binding ii. Government thinks too many units are being traded iii. Example: Import restrictions from foreign countries b. Usually end up with higher prices and more units i. Supply curve becomes perfectly inelastic right at Qq ii. People are willing to pay any price to get it as long as they want it c. Affects the price of something without a quota because since supply for foreign object becomes perfectly inelastic, it seems like foreign object is more expensive- since foreign object looks more expensive, U.S. object looks less expensive and therefore supply for it goes up- in consequence, the price increases for U.S. object as well II. Roots of Macroeconomics a. The Great Depression- was a period of severe economic contraction and high unemployment that began in 1929 and continued throughout the 1930’s b. Classical economics applied microeconomics models, or “market
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Econ102February11 - Econ 102 I. February 11, 2008 Quantity...

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