Decreased Marginal Return Output rate declines with increased

Decreased marginal return output rate declines with

This preview shows page 5 - 6 out of 6 pages.

Decreased Marginal Return Output rate declines with increased input 12-13 workers Negative Marginal Return The situation gets worse Output declines Overcrowded workplace Supply and Demand Equilibrium Price Price where quantity supplied and demanded is the same Non-Equilibrium Situations Shortage Quantity supplied is less than quantity demanded Surplus Quantity supplied is greater than quantity demanded Government Government price control Price ceiling Government regulation establishing a maximum price Producers can’t charge above the set price E.g. rent control Price Floor Government regulation establishing a minimum price Minimum wage laws FDR and New Deal Rationing System Government decides how to distribute goods Ignores of Law of Supply and Demand WW2 Unfair/Expensive/Creates Black Markets Benefits of the Price System Information: know the worth of goods Producers and consumers make informed decisions
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Incentives: price encourages us to act Law of supply and demand Choice: prices create competition Lowers prices and improves quality Efficiency: best use of resources Higher productivity Flexibility: supply demand and change with price Meet the consumers needs and wants
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