ECON 201 1st Edition Lecture 6 Outline of Last Lecture I II Supply Shift in Supply vs Movements along a supply curve III a Quantity supplied Shift factors of Supply IV Clicker questions V Equilibrium VI Excess Demand Outline of Current Lecture I Application of Supply and Demand a Foreign exchange rate b Price of foreign currency II Government interventions on the market Current Lecture I Application of Supply and Demand a The price of foreign exchange rate i The market for foreign currencies is called the foreign exchange forex market ii The exchange rate is the price of one currency in terms of another currency iii Question Hotel in Hong Kong costs 1600HK per night Suppose 1 US 8HK How much is the hotel per night 1 200US b The price of a foreign currency i Why is there supply and demand for forex 1 A currency is just another good These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute II 2 People demand currencies of other countries to buy those countries goods and assets ii Why do we supply forex 1 To buy foreign goods services and assets iii Summary on Supply and Demand Graphs 1 Plot supply and demand Q P 2 Identify the source of the change shift the curve 3 Demand P of other income taste expectation tax number of consumers 4 Supply input cost technology tax expectation number of suppliers 5 Identify Q P and compare with Q and P Government intervention in the market a A price ceiling is a government imposed limit on how high a price can be charged i e rent control b Effective price ceiling at a level lower than P in equilibrium create shortage c A price floor is a government imposed limit on how low a price can be charged d Effective price floor at level higher than P in equilibrium create surplus e Example minimum wage i A minimum wage is set by government specifying the lowest wage a firm can legally pay an employee
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