Example problem based on the information given in the

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Example ProblemBased on the information given in the table, if the government imposes a price floor of $0.90 per pound of butter, the quantity of butter actually bought and sold will be _____ million pounds.a.10.5b.9.0c.1.5d.10.0
SUMMARY of Price ControlsA price ceiling keeps the price of a good down.price ceiling↔ maximumallowed priceA price floor keeps the price of a good up.price floor↔ minimumallowed priceBoth reduce the quantity bought and sold.If the ceiling is belowthe equilibrium price: Sellers won’t want to sell as much as buyers want to buy → shortageIf the floor is abovethe equilibrium price: Buyers won’t want to buy as much as sellers want to sell → surplus
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GLOBAL COMPARISON: Low Wages (2011)
ECONOMICS IN ACTIONSo what conclusions can we draw about the minimum wage?
Oct. 2013
ECONOMICS IN ACTIONSo what conclusions can we draw about the minimum wage?
In their book, Myths and Measurement, economists David Card and Alan Kreuger explain a number of reasons why this might be the case.
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1For example, think of a small town with only one fast food restaurant (although there are other non-wage characteristics that one could think of).In such cases, a minimum wage actually raisesemployment, which runs directly counter to the basic economic intuition of a price floor!1V. Bhaskar and T. To (1999). “Minimum Wages for Ronald McDonald Monopsonies: A Theory of Monosponistic Competition,” The Economic Journal 109(455), pp. 190-203.
Controlling QuantitiesA quantity control, or quota, is an upper limit on the quantity of some good that can be bought or sold.There are different reasons why a government might set a quota on a specific good or service. The total amount of the good that can be legally transacted is the quota limit. An example is the taxi medallion system in New York.Licensing is an indirect way to control quantity. A licensegives its owner the right to supply a good.The demand price of a given quantity is the price at which consumers will demand that quantity.The supply price of a given quantity is the price at which producers will supply that quantity.
The Market for Taxi Rides in the Absence of Government Controls679081011131214$7.006.506.005.505.004.504.003.503.00DSEQuantity of rides (millions per year)Fare (per ride)$7.00$6.50$6.00$5.50$5.00$4.50$4.00$3.50$3.001413121110987667891011121314Quantity of rides(millions per year)Fare(per ride)Quantity suppliedQuantity demanded

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