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PRICE CONTROLS: Government intervention in markets in which legal restrictions are placed on the prices charged. The two basic types of price controls are price ceilings and price floors. Price ceilings are maximum prices set below the equilibrium price. Price floors are minimum prices set above the equilibrium price. Price controls imposed on an otherwise efficient and competitive market create imbalances (shortages or surpluses) which cause inefficiency. However, imposing price controls on a market that fails to achieve efficiency (due to market control, externalities, or imperfect information) can actual improve efficiency. Price controls have also be used economy-wide in an attempt to reduce inflation.
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AGGREGATE SUPPLY INCREASE, LONG-RUN AGGREGATE MARKET A shock to the long-run aggregate market caused by an increase in aggregate supply, resulting in and illustrated by a rightward shift of the long-run aggregate supply curve. An increase in aggregate supply in the long-run aggregate market results in a decrease in the price level and an increase in real production. The level of real production resulting from the shock is a greater level of full-employment real production.
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WHITE GULLIBON
[What's This?]
Today, you are likely to spend a great deal of time touring the new suburban shopping complex hoping to buy either a genuine down-filled comforter or a 200-foot blue garden hose. Be on the lookout for door-to-door salesmen.
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In 1914, Ford paid workers who were age 22 or older $5 per day -- double the average wage offered by other car factories.
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"Divide each difficulty into as many parts as is feasible and necessary to resolve it." -- Rene Descartes
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APT
Arbitrage Pricing Theory
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