E303lect14F09

E303lect14F09 - 22 September 2008 Lecture 14. Reading Baye,...

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22 September 2008 Reading Baye, Ch 3. pp 73-82 (Next time) Lecture 14. Problem Set #4 (due Friday). REVIEW___________________________________________________: II. Chapter Market Forces: Demand and Supply D. Equilibrium. Putting Supply and Demand Together 1. Definition b. Properties ii. Welfare Maximization E. Binding the Market: Price Floors and Price Ceilings 1. Price Floors PREVIEW________________________________________________ 2. Price Ceilings F. Comparative Statics 1. Single Market Changes a. Changes in demand or supply b. Changes in demand and supply LECTURE______________________________________________________ A price ceiling: A regulated maximum price, above which the market price cannot rise. If the floor is above the equilibrium, the regulation exerts no effect. If the floor is below the equilibrium, there is a permanent shortage that the market cannot eliminate. b. Example: Rent control. Result: A shortage of housing, and one that cannot be resolved by the market. Complications: One solution by sellers is to bundle the regulated good with other
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E303lect14F09 - 22 September 2008 Lecture 14. Reading Baye,...

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