Chapter 6 s,d,gov policies

Chapter 6 s,d,gov policies - Chapter 6 Supply Demand and...

Info icon This 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 Control On Prices At the equilibrium price, the quantity that buyers want to buy equals the quantity that sellers sell 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 good can be sold How Price Ceiling Affect Market Outcomes If price that balances supply and demand is below ceiling, the price ceiling is not binding If equilibrium price is above the price ceiling, the ceiling is a binding constraint on the market When a shortage develops because of price ceiling, some mechanism for rationing will naturally develop When government imposes a binding price ceiling on a competitive market, a shortage of the good arises, and sellers must ration the scare goods among the large number of potential buyers When the market reaches its equilibrium, anyone who wants to pay the market price can buy Free markets ration goods with price How Price Floors Affect Market Outcome Price floor places a legal minimum If the equilibrium price is above the floor, the price floor is not binding Market forces naturally move the economy to the equilibrium, and price floor has no effect
Image of page 1

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

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

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern