ECON 1B03 Study Guide - Final Guide: Economic Surplus, Price Ceiling, Deadweight Loss
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28 Dec 2014
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ECON 1B03 Full Course Notes
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Price controls: are usually done when policymakers believe that the market price is unfair to the buyers or sellers, the government will end up freezing prices at a predetermined level as a result. Those who really want the good may not be the ones to get it: wasted resources. Includes time, money, etc: inefficiently low quality. Demand must somewhat be met so care into creation is limited: use/creation of black markets in order to make up for what was lost after the price ceiling was imposed. Price floors: a price floor is the legal minimum on the price at which a good can be sold. It is only binding when sent above the equilibrium price, which leads to a surplus: e. g. Minimum wage: price floors can lead to, surplus production. Producers wanting to supply more at a higher price. Surpluses may be stored (such as agriculture products), destroyed (like draining milk), exported or given away.
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