Econ chapter 4

Econ chapter 4 - Chapter 4: Working with Supply and Demand...

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                   Chapter 4: Working with Supply and Demand I. Government Intervention in Markets Government intervene to change the market outcome Fight the market and manipulate the market A. Fighting the Market: Price Ceilings price ceiling: government imposed maximum price in a market prevents the price from going any higher when quantity supplied and quantity demanded differ, the short side of the market wins- whichever of the two qualities is smaller will prevail short side of the market: smaller of quantity supplied and quantity demanded at a particular price shortage: excess demand not eliminated by a rise in price, so that quantity demanded continues to exceed quantity supplied a price ceiling creates a shortage and increases the time and trouble required to buy the good . While the price decreases, opportunity cost may rise. Black market: market in which goods are sold illegally at a price above the legal ceiling Unintended consequences of price ceilings: long lines, black markets
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This note was uploaded on 02/26/2012 for the course ECON UA-2 taught by Professor Lieberman during the Spring '12 term at NYU.

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Econ chapter 4 - Chapter 4: Working with Supply and Demand...

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