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econ201.SupplyDemand - charged A Examples include insurance...

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Supply and Demand 1. Demand determinants and changes in demand A. Determinants and demand include: Income, tastes, age, quality, advertising, season… B. A change in any determinant other than the good’s own price has the potential to influence demand…the whole relationship between prices and quantities demanded. C. Normal good: a good for which demand increases as income increases D. Inferior good: a good for which demand decreases as income increases. E. Income elasticity: percent change in quantity of x/ percent in income 2. Supply determinants and changes in supply A. Like the demand side of the market, only the price of the good itself can influence the quantity supplies without changing supply a. If as all prices firms/individuals offer more goods for sale to the market than we say “supply has increased”] 3. Price ceiling: a price ceiling is a gov’t imposed limit of how high a dollar price can be
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Unformatted text preview: charged A. Examples include: insurance and utility rates, gasoline and natural gas, food, prescription drugs, rent controlled apartments, tuition. 4. Price Floor: a price ceiling is a government imposed limit on how low a dollar-price can be charged A. A price floor imposed above (below) the equilibrium price is effective (ineffective) 5. Since marginal values are higher than the legal price, there is room for mutual benefit to occur between market participants. a. Suppose those on the demand side are tenants and those on the supply side are landlords. 6. While it may seems paradoxical to many, the best way to help tenants is to grant economic freedom to landlords. 7. Subsidies (as a supply determinant): reverse tax....
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