Chapter 4 - Micro Chapter 4 Supply and Demand: Applications...

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Unformatted text preview: Micro Chapter 4 Supply and Demand: Applications and Extensions 5 Learning Goals 1) Describe the relationship between resource and product markets 2) Analyze the impact of government policies for price controls in markets 3) Determine the effects of a tax in a market 4) Explore the relationship between tax rates and revenues 5) Identify the effects of a subsidy The Link Between Resource and Product Markets Whats the relationship between product markets and resource (input) markets? An increase (decrease) in demand for a product will increase (decrease) demand for resources that make that product When the product price rises, the resource price will eventually rise Graphs: The Economics of Price Controls 2 Kinds of Price Controls: (1) Price ceiling puts an upper limit on price; generates a shortage and a deadweight loss (2) Price floor puts a lower limit on price; generates a surplus and a deadweight loss Deadweight loss (DWL) = loss of gains from trade; loss of CS and PS Price Ceiling Graph: Price Floor Graph:...
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This note was uploaded on 04/02/2012 for the course ECO 2023 taught by Professor Joecalhoun during the Spring '12 term at Florida State College.

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Chapter 4 - Micro Chapter 4 Supply and Demand: Applications...

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