Lecture B (WK2)

Lecture B (WK2) - Lecture B (WK2) Welcome Back! Chapter 4...

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Lecture B (WK2) Welcome Back! Chapter 4 – Demand and Supply Applications The market system performs two important and closely related functions. first, it provides an automatic mechanism for distributing scarce goods and services ( price rationing ) and second, it determines both the allocation of resources among producers and the final mix of outputs. On occasion, governments and private firms decide to use some mechanism other than the market system to ration an item for which there is excess demand at the equilibrium price. the rationale most often used is "fairness" in the market. These rationing arrangements can often create price floors or price ceilings: A price ceiling is a maximum price that sellers may charge for a good and is usually set by government. A price floor is a minimum price below which exchange is not permitted. The minimum wage is an example of a price floor. Note that a price ceiling is a price
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This note was uploaded on 06/15/2010 for the course EC 142DLB taught by Professor Graceonodipe during the Spring '10 term at Park.

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Lecture B (WK2) - Lecture B (WK2) Welcome Back! Chapter 4...

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