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Price Controls government regulations to set either a maximum or minimum price for a product Price Ceiling a government regulation stipulating the maximum price that can be charged for a product Price Floor a government regulation stipulating the minimum price that can be charged for a product 3-1© 2012 McGraw-Hill Ryerson Limited LO3
Price Ceiling Used when present market price for a particular product is considered too high for many buyers The product is felt to be a necessity Example: rent control 3-2© 2012 McGraw-Hill Ryerson Limited LO3
Price Ceiling Price ceilings cause shortages 3-3© 2012 McGraw-Hill Ryerson Limited LO3
Allocating Shortages The market (supply and demand) First come, first served Producers preferences Rationing 3-4© 2012 McGraw-Hill Ryerson Limited LO3
a)Suppose the government introduces a price ceiling that is 20 cents different from the present equilibrium price. Would the result be a surplus or a shortage? Of what quantity? b)If an illegal market were to develop, what would be the maximum illegal market price? Self-Test 3-5© 2012 McGraw-Hill Ryerson Limited LO3
Quota A quota, or restricting output, can raise price without causing a surplus 3-6© 2012 McGraw-Hill Ryerson Limited LO3
a)In equilibrium, what is the total revenue received by producers? b)Suppose that government imposes a price floor of $4 per kilo. What quantity will be demanded? What quantity will farmers produce? What quantity will government buy? c)How much will it cost to buy the surplus? Self-Test 3-7© 2012 McGraw-Hill Ryerson Limited LO3
SAYRE | MORRIS Seventh Edition Demand and Supply: an Elaboration CHAPTER 3 3-1© 2012 McGraw-Hill Ryerson Limited.
Manipulating Supply & Demand Price floors and ceilings.
What are “demand” and “supply” and how do they work together to determine the prices of goods and services?
Combining Supply and Demand. Equilibrium Equilibrium is the point where supply and demand come together – Balance between price and quantity – The market.
+ Price Controls in the Product Market Understand how price controls affect the marketplace.
PRICES Chapter 5. In a free-enterprise market, prices are the main form of communication between producers and consumers.
Price Floors & Ceilings Government Price Controls in a Free Market?
Lecture notes Prepared by Anton Ljutic. © 2004 McGraw–Hill Ryerson Limited Demand and Supply: An Elaboration CHAPTER THREE.
Supply & Demand. Equilibrium-When demand and supply are equal Disequilibrium- when supply and demand are not equal *Market Clearing Price/Quantity.
JOURNAL ACTIVITY: What happens as the price of a good decreases? What happens as the price of a good decreases? When would a shortage of a product occur?
Unit 2 : Reading Quiz # 5 : 6 points 1. With a down-sloping demand curve and an up-sloping supply curve for a product, a decrease in resource prices will:
Government Intervention in the Markets Economic Institutions: Changes Needed to Ensure Economic Prosperity.
Essential Question: How do Supply and Demand work together to form a picture of the economy as a whole?
GOVERNMENT MARKET INTERVENTION Price Controls. Price Ceilings Legal maximum price Example: rent controls (note: in NC, state legislation prevents.
Chapter 7 Demand & Supply Demand & Supply. Demand the amount of a good or service that consumers are able and willing to buy at various possible prices.
Main Definitions Market: –All situations that link potential buyers and potential sellers are markets. Demand: –A demand schedule shows price and quantity.
1 Price Supports Here are two examples of government intervention in a market.
Setting Prices Advantages of prices –Prices are neutral because they do not favor the buyer or the seller. They are the result of competition Prices are.
Putting Supply and Demand Together. Defining and Moving to Equilibrium Both supply and demand work Equilibrium the point at which the quantity – At equilibrium,
Supply and Demand Equilibrium Adapted from material provided by Hudson Falls High School.
Supply, Demand, and Government Policies In a free, unregulated market system, who or what establishes Eq Q and Eq P? Equilibrium conditions may be.
CHAPTER 6: DEMAND, SUPPLY, AND PRICES. Key Concept: Equilibrium Market Equilibrium: Occurs when the quantity demanded and the quantity supplied at a.
What do you think?: Should we increase minimum wage? CIE3M Price Controls.
When you have completed your study of this chapter, you will be able to C H A P T E R C H E C K L I S T Distinguish between quantity demanded and demand.
Economics Chapter 6 Bringing Supply and Demand Together.
Unit 2, Lesson 2 Cost Analysis Learning Targets: IWBAT graph and explain how firms determine price and output through marginal cost and analysis IWBAT.
Price Qty Q1Q1 E1E1 P1P I-Pods.
Chapter 6. Government interferes to keep some prices from going to high Price ceiling- legal maximum price a seller may charge for a product ◦ Set.
Equilibrium MARKET DEMAND & SUPPLY $ $ x 200 B U Y E R S PQDQD BUSHELS OF CORN MARKET DEMAND 2,000 4,000.
1.Explain how prices act as signals. 2.Describe the advantages of using prices as a way to allocate economic products 3.Understand how prices are determined.
1 Price Ceilings & Price Floors Price Floors 2 What is a Price Ceiling? below the market A maximum price set by government below the market generated.
Supply …Meets Demand. Essential Standards The student will explain how prices and profits work to determine production and distribution in a market economy.
Chapter 3: Competitive Dynamics How Competitive Markets Operate Market Equilibrium: The stable point at which demand and supply curves intersect PRICE.
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Excise Tax And Allocative Efficiency. Effect of a $.15 Excise Tax QuantitySupply Price Before Tax Supply Price After Tax.
Activities and Definitions. Q s = P Q d = P ◦ Price is in dollars per bushel ◦ Quantity is in millions of bushels per year Find.
Supply, Demand, and Government Policies E conomics P R I N C I P L E S O F Chapter 6.
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Markets in Action CHAPTER 7 C H A P T E R C H E C K L I S T When you have completed your study of this chapter, you will be able to 1 Explain how a price.
Jeopardy All things equal Changes Less or More More of Less Price Q $100 Q $200 Q $300 Q $400 Q $500 Q $100 Q $200 Q $300 Q $400 Q $500 Final Jeopardy.
Floors and Ceilings. After World War II, many veterans came home and immediately decided to start families After World War II, many veterans came home.
Government Imposed Price Controls The government should make gas cheaper and minimum wage higher!
Chapter 6 notes – all sections. Price Adjustment Process Market Equilibrium - a situation in which prices are relatively stable, and Qs = Qd (S and D.
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October 4&5, The setting of prices (usually by the government) so that prices can not adjust to the equilibrium level that was determined by demand.
1. Collect Current Event 2. Finish Chapter 3 Notes: Ceilings and Floors 3. Review HW.
Supply and Demand at Work 21.3 & What is Supply and Demand The amount of goods a producer is willing to sell at market prices. Opposite of demand.
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