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Unformatted text preview: Coffee & pop Different brands of same good P x D y (right) P x D y (left) Mobil Hagadorn & Haslett Marathon Hagadorn & Grand River o Fairly close substitutes o Prices of close substitutes must be close o Demand right P D More popular Incomes (normal) Income (inferior) Price of complement Price of substitute o Demand left P Q Less popular o S right P Q Price of input Tech. improvement o S left P Q Deterioration of tech. o Market forces push strongly toward equilibrium price Unless equilibrium price is outlawed Price controls A. price ceiling Maximum legal price o Ex. : rent controls Some communities Gasoline price controls until 1980s B. price floor Minimum legal price o Ex: agriculture price supports o Minimum wage...
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This note was uploaded on 04/19/2011 for the course EC 201 taught by Professor Ballard during the Fall '08 term at University of Michigan.
- Fall '08