Lecture 6

# Lecture 6 - EC 1 UCLA Dr Bresnock Lecture 4 Market Analysis...

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EC 1 UCLA Dr. Bresnock Lecture 4 Market Analysis Continued In the table below, several points will be made to review the material that was covered in the last lecture. Then we will proceed to tabulate new information pertaining to our market analysis. Table 1 Market Analysis (1) (2) (3) (4) (5) (6) (7) EP using (3,4) TR QS P QD TR EP use (4,5) Elasticity 100 11 40 1.11 900 90 10 50 500 -2.33 E 1.12 720 80 9 60 540 -1.73 E 1.13 560 70 8 70 560 -1.31 E 1.15 420 60 7 80 560 -1. Unit Elastic 1.18 300 50 6 90 540 -.76 I 1.22 200 40 5 100 500 -.58 I 1.29 100 30 4 110 440 -.43

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EC 1 Lecture 4 A. Bresnock Graph 1 Market Equilibrium and Adjustment to a Surplus Graph 2 Market Equilibrium and Adjustment to a Shortage 2
EC 1 Lecture 4 A. Bresnock Price Controls -- one form of government intervention in markets. There are two types of price controls, P C . 1) Price Ceilings -- For an effective price ceiling to work, it is set so that the market price will not rise above P C . Results: Misallocation of resources = too little is produced. Graph 3 Price Ceiling vs Market Equilibrium (Ex. Rent control) 2) Price Floor -- For an effective price floor to work, it is set so that the market price will not fall below P C . Results: Misallocation of resources = too much is produced. Graph 4 Price Floor vs Market Equilibrium (Ex. Agricultural price supports) A B Price Floor P C Q D Q E Q S Q s – Q E = misallocation of resources TR @ Eq = P E * Q E TR @ P C = P C * Q S TR increases, assuming there is a buy up to surplus 3

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EC 1 Lecture 4
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## This note was uploaded on 07/05/2011 for the course ECON 1 taught by Professor Nagata during the Spring '08 term at UCLA.

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Lecture 6 - EC 1 UCLA Dr Bresnock Lecture 4 Market Analysis...

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