07-start macro - From Markets to Macro Lecture 7-PREVIEW...

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macroS2010 Lec7-page 1 http://www.arts.cornell.edu/econ/wissink/econ102jpw/ From Markets to Macro Lecture 7-PREVIEW Jennifer P. Wissink ©2009 John M. Abowd and Jennifer P. Wissink, all rights reserved. February 15, 2010
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macroS2010 Lec7-page 2 http://www.arts.cornell.edu/econ/wissink/econ102jpw/ From Demand & Supply Functions to Demand and Supply
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macroS2010 Lec7-page 3 http://www.arts.cornell.edu/econ/wissink/econ102jpw/ From Demand & Supply Functions to Demand and Supply
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macroS2010 Lec7-page 4 http://www.arts.cornell.edu/econ/wissink/econ102jpw/ Demand and Supply: Applications
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macroS2010 Lec7-page 5 http://www.arts.cornell.edu/econ/wissink/econ102jpw/ Price Floors Government established minimum selling price. Floor must be above P* to be binding. Why? Government usually thinks the market price is too low for some reason. Examples: » Usually end up with…. Surpluses! And all the problems they create.
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macroS2010 Lec7-page 6 http://www.arts.cornell.edu/econ/wissink/econ102jpw/ Price Supply Quantity Demand Equilibrium is at P*= 17 and Q*= 23 . 17 23 25 15 31 Surplus = 16 P floor = $ 25 . At the artificially high price of $ 25 , sellers want to sell 31 . There is a surplus of 16. But buyers only want to buy 15 .
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macroS2010 Lec7-page 7 http://www.arts.cornell.edu/econ/wissink/econ102jpw/ Price Ceilings Government established maximum selling price. Must be below P* to be binding. Why? Government usually thinks the market price is too high for some reason. Examples: » Usually end up with…. Shortages! And all the problems they generate.
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macroS2010 Lec7-page 8 http://www.arts.cornell.edu/econ/wissink/econ102jpw/ Price Supply Quantity Demand 17 23 10 Shortage = 14 Equilibrium is at P*= 17 and Q*= 23 . 16
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07-start macro - From Markets to Macro Lecture 7-PREVIEW...

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