BU224M2-2: Examine changes in price and quantity caused when governments take actions to modify market outcomes
Government interventions
and Market Efficiency
Welcome to Unit 6
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Low
Price
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D1
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Consumers - DEMAND
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$ 9
$ 8
$ 7
$ 6
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$ 4
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Why would curve shift right?
- MORE consumers
- Increased INCOME
- More TASTE for this item
- Changed EXPECTATIONS
- Increase in price of the SUBSTITUTE product
Demand curve SHIFTED to the RIGHT because
MORE are demanded at EVERY price
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$ 9
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$ 6
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SUPPLIERS
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- $11
- $10 - $ 9
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$ 7
$ 6
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Supply curve SHIFTED to the RIGHT because
MORE are SUPPLIED at EVERY price
Why would curve shift RIGHT ?
- More SUPPLIERS
- Decreased INPUT prices
- Improved TECHNOLOGY
- Changed EXPECTATIONS
- Decrease in price of the RELATED product
(gasoline and heating oil)
S2
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Government interventions
and Market Efficiency
Unit 6
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This week’s Discussion Topic
Should the government put a price ceiling on prescription drugs ?
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This week’s Assignment
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Things that it may be helpful to remember
when you do the assignment and get to the end of the course
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Things that it may be helpful to remember
when you get to the end of the course
A price floor or a price ceiling is an example of:
a price control.
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Things that it may be helpful to remember
when you get to the end of the course
The minimum wage, which sets a lower limit on the wages that workers can earn, is often above the equilibrium price. The minimum wage is an example of:
a price floor.
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Things that it may be helpful to remember
when you get to the end of the course
Government intervention in the form of price floors or price ceilings will:
result in either surpluses or shortages.
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Things that it may be helpful to remember
when you get to the end of the course
An effective price ceiling will most likely result in which of the following?
an increase in consumer surplus .
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Things that it may be helpful to remember
when you get to the end of the course
Price ceilings may be imposed if
demanders can make strong moral or political arguments for lower prices.
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Things that it may be helpful to remember
when you get to the end of the course
When a price ceiling is imposed, this results in:
inefficiency due to overconsumption of the good
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Things that it may be helpful to remember
when you get to the end of the course
Inefficient allocations of goods to consumers often result from:
price ceilings.
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Things that it may be helpful to remember
when you get to the end of the course
A price ceiling on a good often results in:
black market or underground transactions of the good.
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Things that it may be helpful to remember
when you get to the end of the course
A rent control scheme that would set a maximum amount of rent paid that is below the equilibrium rental price would most likely be supported by which of the following groups?
people who wish to rent such an apartment
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Things that it may be helpful to remember
when you get to the end of the course
In the rental housing market, landlords determine the number of units rented. If a price control is present in the market, this control must be a:
price ceiling.
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Things that it may be helpful to remember
when you get to the end of the course
An increase in producer surplus would occur if:
an effective price floor was imposed.
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Things that it may be helpful to remember
when you get to the end of the course
Government may choose to impose a price floor if:
suppliers can make strong moral or political arguments for higher prices.
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Things that it may be helpful to remember
when you get to the end of the course
An effective price floor would result in
a surplus of the good.
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Things that it may be helpful to remember
when you get to the end of the course
If wages are set above the equilibrium wage in the market, then the number of workers hired will depend upon:
employers.
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Things that it may be helpful to remember
when you get to the end of the course
An effective minimum wage ultimately means that:
employees must demonstrate that they have characteristics greater than other potential employees even if they are willing to work at a lower wage.
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Things that it may be helpful to remember
when you get to the end of the course
An effective price floor will lead to:
a resulting excess supply or a surplus.
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Things that it may be helpful to remember
when you get to the end of the course
A quota is essentially a:
quantity restriction.
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Things that it may be helpful to remember
when you get to the end of the course
If government decides to control the amount of a good allowed into a market, this effectively will:
increase incentives for market participants to engage in illegal or black market activities.
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What to do this week!
- Read my announcements
- Read chapter 5
- Post to the discussion (before Saturday night)
- Post to the discussion on 3 separate days
- Post to at least TWO classmates’ Discussion
- Do the assignment
- Remember to include references
- Come to me when you have a question.
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18.unknown
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Next week - Unit 7:
Fixed Costs and Variable Costs
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You can contact me
through my email: CRakovalis@purdueglobal.edu,
Rakovalis@comcast.net, or through the “Virtual Office” link under the Course Home page
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T H A N K Y O U
F O R
A T T E N D I N G
SEE YOU IN THE DISCUSSION THREAD QUESTIONS
AND IN NEXT WEEK’S SEMINAR
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