ECON 200 Chapter Notes - Chapter 6: Drug Education, Economic Equilibrium, Price Ceiling
Document Summary
Chapter 6: supply, demand, and government and politics. Elasticities of demand and supply can let us know the relative effects (of a shift in a demand or supply curve) on price and quantity. Dissatisfaction with the results of the law of supply and demand is a motivation for government action. This dissatisfaction arises from the outcome being politically unacceptable. For example, if rents on apartments are seen as too expensive, then there may be pressure on the government to regulate the market for apartments. An obvious way to try to circumvent the law of supply and demand is to legislate a restriction of the price of a good or service. Price ceiling: a legal maximum on the price of a good or service. Price floor: a legal minimum on the price of a good or service. If wages are believed to be too low, then there may be pressure on the government to regulate the labor market.