ECON 102 1st Edition Lecture 9 Outline of Last Lecture 1 Intervention in Efficient Markets a Price Controls i Price Ceiling ii Price Floor b Quantity Controls Outline of Current Lecture I Intervention in Efficient Markets a Quantity Controls i New York Cabs II Slope of a Demand Curve a Graphing a Demand Curve Current Lecture Quota o Limits the quantity of a good that can be bought or sold o Should always be a fixed point before the equilibrium quantity Wedge o The difference between the demand price and the supply price o What is the price the consumers are willing to pay and what is the price the producers are willing to sell their product for Example o New York City sets a quota of the amount of licensed cab drivers that can work Measuring the number of cab rides to the price of cab rides o 4 is the cost of the ride for the driver 6 is the cost to the customer to get a ride THE WEDGE 2 the difference between the two The 2 will go to the license holder whether that is the driver or the company the driver works for This is also known as a Quota Rent The owner of the license can drive his cab OR he can rent it out to another driver for a cost in this case 2 Quota Limit The quantity allowed for sale Consequences of Quantity Control 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 o Inefficient Quantity Transacted The quota limit doesn t allow transactions to happen between buyers and sellers even if they are willing to make purchase the product o Black Market Selling Buying Because there are transactions that people would like to make but are not allowed to quantity controls generate an incentive to evade them or even to break the law Slope of a Demand Curve D F P I T E P C Demand Function VERY General Terms D F P D 4 P Specific Form of Demand Function Does it work Because it is a negative relationship this DOES obey the law of demand How do we calculate slope P 4 D Inverted Demand Function In order to get the correct graph First Step Find the intercepts Set X to 0 to find Y Intercept Set Y to 0 to find X Intercept P 4 0 P 4 0 4 D D 4 Second Step Graph and join the two points together Third Step The Slope is the change of Y the change of X 4 4 1
View Full Document
Unlocking...