BSNS108 Lecture Notes - Shortage, Price Controls, Price Floor

• School: University of Otago
• Department: Business Studies
• Course: BSNS108
• Professor: Helen Lu

Document Summary

Price controls the government sets the price at some price other than the equilibrium price. It is illegal to buy and sell at a price closer to the equilibrium than the set price. Two types of price controls: price ceiling the price is set below the equilibrium price. It is illegal to buy and sell at a: price floor the price is set above the equilibrium price. It is illegal to buy and sell at a price above the set price. price below the set price. Due to voluntary exchange, sellers do not have to sell more than the quantity supplied. Therefore, we say that the quantity bought and sold in the market is supply determined. Due to voluntary exchange, buyers do not have to buy more than the quantity demanded. Therefore, we say that the quantity bought and sold in the market is demand determined.