MATH 133 Lecture Notes - Lecture 5: Price Ceiling, Price Floor, Economic Equilibrium

• School: McGill University
• Department: Mathematics & Statistics (Sci)
• Course: MATH 133
• Professor: Nagham Sayour

Document Summary

Partial-equilibrium analysis examines a single market in isolation and ignores feedback effects from other markets. Appropriate when the specific market is relatively small to the entire economy. When economists study all markets together, they use general-equilibrium analysis. If price is set above equilibrium, some sellers will be unable to find buyers. Surplus; supply is bigger than the quantity demanded. In the market, the numbers they would use is quantity demanded; whatever is less is what is exchanthe ged in the market. Conversely, if price is set below equilibrium, some buyers will be unable to find sellers. Shortage; more demanded than can be supplied. With administered prices, the quantity is determined by the lesser of quantity demanded and supplied. Price floor - the minimum price a good can be supplied in the market. Price ceiling - the maximum price at which a product may be exchanged. Black market - selling items at a price lower/higher than allowed; illegal.