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Chapter 2




               7.2  A Government sets maximum prices

                    Typically to protect consumers and/or control inflation


                                         P
                                                     D                     S





                                         P max
                                                        D> S

                                                                           Q




                    Shortages                    Queues, black markets, prices higher second hand

                    Arbitrary allocation of
                     resources

                    Misallocation of             E.g. companies may cut quality
                     resources




                  Illustrations and further practice

                  Now try TYUs 14,16 – 19 from Chapter 2






























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