Post on 21-Jan-2015
description
Bellringer
1. Is equilibrium price always fair?
2. Think of an example when it might not be.
Chapter 6
An offer• Test corrections• Up to ½ of what you missed• Due Monday 9/17 start of class or earlier
• Must turn in original answer sheet along with: • A. why correct answer is right• B. Why the answer you picked is wrong
Dead weight loss
• Misallocation of market resources• In other words: inefficiency• Causes:
1. market interferences (taxes, regulation)
2. Incomplete information
3. Monopolies
4. External supply issues (IE: pollution)
Functioning market at Equilibrium
Problem with Market, price now at higher place B & C “DWL”
• QS!• Q1 to Q2
Price floors – low limit on how low a price can go
Price Ceiling – limit on how high a price can go
Government Solutions!
Price CeilingDesigned to help
consumers
Illegal to charge higher than the price
Example: Rent Controls
Problems?
Quality
Shortages
Price CeilingDesigned to help
consumers
Illegal to charge higher than the price
Example: Rent Controls
Problems?
Quality
Shortages
Stossel Clip
Price Floors
Designed to help firms
Illegal to charge lower than the price
Example: Farmers during New Deal
Problems?
Efficiency
Surpluses
“subsidies” – payments from government to business
Price Floors
Designed to help firms
Illegal to charge lower than the price
Example: Farmers during New Deal
Problems?
Efficiency
Surpluses
Stossel Clip
Homework• Complete my Price Floor/Ceiling worksheet
• Write me a new one for the regular students