Chapter6 - Chapter 6: Supply, Demand and Government...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 6: Supply, Demand and Government Policies Controls on Prices - Price Ceiling: a legal maximum on the price at which a good can be sold - Price Floor: a legal minimum on the price at which a good can be sold 1. How Price Ceilings Affect Market Outcomes a. If the price that balances supply and demand is below the ceiling, the price ceiling is not binding b. If the price that balances supply and demand is above the price ceiling then the ceiling is binding constraint c. Forces of supply and demand move price toward equilibrium, unless it is blocked by a price ceiling d. Shortage when the price ceiling is below the equilibrium price, quantity supplied is less than the quantity demanded e. If the equilibrium priceis above the price floor, the price floor is not binding, and market forces naturally move the economy to equilibrium f. If the equilibrium price is below the price floor, the price floor is binding- some people may not be able to sell their ice cream g. Minimum Wage: g.i. Free Labor Market allows for employment to adjust itself and
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 2

Chapter6 - Chapter 6: Supply, Demand and Government...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online