Chp6- Government actions in Market

Chp6- Government actions in Market - 1DisequilibriumPrices

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1Disequilibrium Prices Government intervention in the market place Government intervention disrupts the market mechanism  When there are disequilibrium prices, the quantity traded is  going to be the lesser or quantity demanded and quantity  supplied A disequilibrium price is set above or below equilibrium Consider price p1 what is the quantity traded q1 or q2 Examples of Price Controls: Price ceiling o A legal maximum set below the equilibrium price 6-1
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o See Diagram 1:  Rent Ceiling 6-2
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Diagram 1:  Price Ceiling P Q D S 6-3
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Implications of Price Ceilings o Search Activity  o Black Markets  6-4
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Rent Ceilings in Practice o Short run o Long run http://online.wsj.com/article/SB122126309241530485.html http://en.wikipedia.org/wiki/Assar_Lindbeck 6-5
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Price Floor  o A  legal minimum price above the equilibrium  price Example: o Minimum wage law For a discussion on minimum wage rates see: http://www.labour.gov.on.ca/english/news/pdf/2007/07-63b3.pdf See Diagram 2:  A Price Floor 6-6
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Diagram 2:  Price Floor P Q D S 6-7
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RAISING THE MINIMUM WAGE FROM $8 TO $10 A recent study, done in 2007 by Morley Gunderson at the University of Toronto, states that 
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This note was uploaded on 04/02/2010 for the course ECON econ101 taught by Professor Trimarchi during the Fall '09 term at Waterloo.

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Chp6- Government actions in Market - 1DisequilibriumPrices

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