SC ECON 221 - Intro to Government Intervention (2 pages)

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Intro to Government Intervention

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Intro to Government Intervention


This lecture reviews efficiency, then begins discussing government intervention on wages and price controls.

Lecture number:
Lecture Note
University Of South Carolina-Columbia
Econ 221 - Prin of Microeconomics

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ECON 221 Lecture 7 Outline of Last Lecture I Efficiency II Willingness to Pay III Consumer Surplus IV Producer Surplus Outline of Current Lecture I Efficiency reminders II Government intervention III Wages IV Price Control Current Lecture Efficiency reminders 1 Equilibrium outcomes not necessarily efficient A In markets where my actions impact people not involved in the transaction equilibrium is not efficient 2 Efficient outcomes are only good in the sense that they avoid waste Not necessarily fair 3 Markets have the most efficient outcomes when left alone 4 Government intervention A A few ways the gov could get involved a Taxes subsidies b Price restrictions setting max or min price c Quantity restrictions setting a max or min quantity 1 Ex Taxis in NY many health related industries nursing homes Etc 5 Economics of minimum wages A Federal minimum wage 7 25 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 B C D E F G H a 21 states have higher minimum wages b Washington state 9 32 Past year to push dramatically increase wage a Obama increased minimum wage to 10 10 for federal workers and contractors Part of the pressure comes from the fact that value of minimum wage accounting for inflation is lower than it used to be a Real minimum wage decreasing b Nominal minimum wage increasing What impact would an increase in minimum wage have a Possible reduction in employment b Possible generation of inefficiency We ve seen that markets lead to efficient outcome allocate goods to those who want them most Price controls a Price ceiling gov sets a maximum price for a good 1 Ex Rent control 2 Leads to decrease in total surplus A Total surplus was our measure of how well off all market participants are B Call loss in total surplus deadweight loss a Loss in total surplus that occurs when an action or policy reduces the quantity transacted b Missed opportunities for transactions

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