Lecture Notes 2

Lecture Notes 2 - Basic Forms of Market Intervention by...

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Basic Forms of Market  Intervention by Governments Price ceilings Price floors Sales taxes
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A Market with a Price Ceiling  A Price Ceiling That Is Binding Quantity of Ice-Cream Cones 0 Price of Ice-Cream Cone Demand Supply 2 Price ceiling Shortage 75 Quantity supplied 125 Quantity demanded Equilibrium price $3
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Market for Gasoline with a Price Ceiling The Price Ceiling on Gasoline Becomes Binding Quantity of Gasoline 0 Price of Gasoline Demand S 1 S 2 Price ceiling Q S 4. . . .  resulting in a shortage. 3. . . . the price ceiling becomes binding . . . 2. . . . but when supply falls . . . P 2 Q D P 1 Q 1
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Short Run and Long Run Rent controls are ceilings placed on the  rents that landlords may charge their  tenants. The goal of rent control policy is to help  the poor by making housing more  affordable. One economist called rent control “the 
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Lecture Notes 2 - Basic Forms of Market Intervention by...

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