Look at These Prices!
In This Chapter
• Factors that affect prices
• All about elasticity
• How a sales tax affects supply and demand
• The effects of rent control and a minimum wage
As the saying goes, “Everything has a price.” The question for anyone trying to understand an economy is, “Why that particular price?”
In Chapter 4 we saw how supply and demand interact in the market so that the right amount of goods and services is produced. Chapter 4 also introduced the price mechanism and its role in determining supply and demand. In this chapter, we learn how the consumer’s need for a product affects demand and how market interventions, such as sales taxes and rent control, affect supply, demand, and prices.