Authors libby rittenberg 183
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legislating maximum or minimum prices, the government has kept the
prices of certain goods below or above equilibrium. We will look at the
arguments for direct government intervention in controlling prices as well
as the consequences of such policies. As we shall see, preventing the price
of a good from finding its own equilibrium often has consequences that
may be at odds with the intentions of the policy makers who put the
regulations in place.
In the third section of the chapter we will look at the market for health
care. This market is interesting because how well (or poorly) it works can
be a matter of life and death and because it has special characteristics. In
particular, markets in which participants do not pay for goods directly, but
rather pay insurers who then pay the suppliers of the goods, operate
somewhat differently from those in which participants pay directly for
their purchases. This extension of demand and supply analysis reveals
much about how such markets operate.
4.1 Putting Demand and Supply to
Work
LEARNING OBJECTIVES
1. Learn how to apply the model of demand and supply to explaining the
behavior of equilibrium prices and quantities in a variety of markets.
2. Explain how technological change can be represented using the model
of demand and supply.
3. Explain how the model of demand and supply can be used to explain
changes in prices of shares of stock.
Attributed to Libby Rittenberg and Timothy Tregarthen
Saylor URL: />
Saylor.org
183
