Econ11Fall2007NotesForLecture_6Sept24

Econ11Fall2007NotesForLecture_6Sept24 - Lecture VI Notes...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Lecture VI Notes For Sept 24, 2007 More Marshalian Cross Review: Effects of a Price Ceiling or Price Floor I. Time Period & the Shape of Demand & Supply Curves II. Effects of Specific Taxes On Market Equilibrium III. Effects of Ad Valorem Taxes on Market Equilibrium Review: Effects of A Price Ceiling Or Price Floor A. Price ceiling makes it illegal to sell for higher price 1. The supply curve is cut off at the price ceiling 2. Examples rent control, gasoline, recently China, Venezuela Effects of a Price Ceiling Shown on a Marshalian Cross Diagram $/Q S P* P B D Q B Q* Q B. Price floor means government policy “supports” price or makes it illegal to sell below a price, sometimes very complex Effects of a Price Floor Shown on a Marshalian Cross Diagram $/Q S P B P* D Q B Q* Q’ B Q
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
1. Examples of a price floor in the US: peanuts, milk, minimum wages in labor markets 2. Problem:What to do with the excess supply? a. Government can purchase the surplus and store it, destroy it or sell it abroad (often at a loss) – peanuts, milk b. Require the surplus output to be sold for another purpose…Milk is reduced to power and stored in caves, or fed to cattle, or producers must use it to make cheese, butter, and ice cream
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/18/2008 for the course ECON 011 taught by Professor Yezer during the Fall '07 term at GWU.

Page1 / 5

Econ11Fall2007NotesForLecture_6Sept24 - Lecture VI Notes...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online