Chapter 6 Lecture Outline - Economics 101H Vandan Desai...

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Economics 101H Vandan Desai P a g e | 1 Chapter 6: Supply, Demand, and Government Policies (Lecture Outline) -------------------------------------------------------------------------------------------------------------------------- I. Controls on Prices A. In a free, unregulated market system, market forces establish equilibrium prices and exchange quantities B. While equilibrium conditions may be efficient, not everyone is satisfied C. One of the roles of economists is to use their theories to assist in development of policies D. Controls on prices are usually enacted when policymakers believe the market price is unfair to buyers or sellers E. Result in government-created price ceiling and floors i. Price Ceiling: A legal maximum on the price at which a good can be sold Price is not allowed to rise above this level ii. Price Floor: A legal minimum on the price at which a good can be sold Price cannot fall below this level F. How Price Ceilings Affect Market Outcomes i. Price ceiling is not binding if set above the equilibrium price Market forces naturally move the economy to the equilibrium
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Chapter 6 Lecture Outline - Economics 101H Vandan Desai...

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