ECON 2105 week 4 notes
ECON 2105 week 4 notes ECON 2105
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This 3 page Class Notes was uploaded by Randi on Sunday September 11, 2016. The Class Notes belongs to ECON 2105 at University of Georgia taught by McWhite in Summer 2016. Since its upload, it has received 8 views. For similar materials see Macroeconomics in Macro Economics at University of Georgia.
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Date Created: 09/11/16
Week 4 Notes ECON 2105 PROF. MCWHITE • Market clearing price: o Also known as the equilibrium price • Price controls: o Price floor or Price ceiling o Set in place by the government o Usually do more harm than good o Usually do not help the people they were intended too o A binding price floor/ceiling is one that impacts the market o Black markets can arise because of price controls • Price gouging laws: o Temporary ceiling on prices that sellers can charge during times of national emergency § Typically happen after natural disasters § In most states, this is illegal • Price floor: o The price floor is the lowest allowed price that a product can be sold at o Price floor can be binding § This means that the set price is above the equilibrium price o An example of a price floor is the minimum wage § Most minimum wages are non-‐binding P Supply B C Price floor A Demand QD • This figure depicts a binding price floor… it is a price set above the equilibrium point • Point A was the original equilibrium point for the labor market without the minimum wage price floor. Week 4 Notes • There is now a surplus of labor in the market (unemployment) between points B and C • There are more people demanding jobs versus willing employers Week 4 Notes • Price ceiling: o A set price that the market cannot exceed o An example is Rent control § Rent control is ineffective for helping low-‐income residents § It usually subsidizes higher-‐income residents’ living § It does not incentivize land lords to keep their apartments in good living condition Supply P A B C Price ceiling Demand QD • The figure above depicts a binding price ceiling in rent control o The equilibrium price A is above the set price… the market cannot obtain equilibrium o The distance between point B and C represent the shortage in the housing market § The quantity demanded for housing in point C far exceeds the quantity that is being supplied at point B
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