ch5 - Chapter 5 Markets in Action Price Floor Price Ceiling...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 5 – Markets in Action Price Floor Price Ceiling Exercises Price Floor ( Fig 5-2 ) A price floor is a minimum permissible price. e.g. : Minimum wage, Agricultural price support Rationale : …Sellers of essential goods should earn more. …Avoid exploitation of labour (teen-agers) Results : An effective price floor …is set above the equilibrium price …results in fewer units being sold. …makes buyers worse off, some sellers better off & other sellers worse off. …causes excess supply. in labour markets excess supply …results in unemployment …is allocated by …favoritism or asking sellers for credentials …in agricultural markets excess supply is eliminated by …government purchases quotas (output restrictions) EC120 Chapter 5 –Markets in action 1 of 4
Background image of page 1

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

View Full DocumentRight Arrow Icon
Result : Quotas only benefit the first owner EC120 Chapter 5 –Markets in action 2 of 4
Background image of page 2
Price Ceiling ( Fig 5-3 ) A price ceiling is a
Background image of page 3

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

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 4

ch5 - Chapter 5 Markets in Action Price Floor Price Ceiling...

This preview shows document pages 1 - 4. Sign up to view the full document.

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