Market in Action

In: Business and Management

Submitted By yuntang
Words 1358
Pages 6
Markets in action
YUN TANG 43101418
Abstract
Explain how do the price elasticity of demand and the price elasticity of supply impact magnitude of the impact from market intervention. Explain the reason and the method that government intervene the market price. Analysis the Chinese governments’ intervention and the unexpected outcomes on Chinese housing market in 2008 and 2010.
Keywords
Price elasticity of demand Price elasticity of demand Chinese housing market Government intervention

There are various ways for the government to intervene the market and the major way is to fix the price ,not setting a minimum price or setting a maximum price. Once the government fix the market price, there will be some differences both in demand and supply. When the price of a good rises , the quantity demand will fall while the quantity supply will rise, and vice versa. The price elasticity of demand and the price of elasticity can interpret the impact magnitude of the impact from market intervention. The price elasticity of demand equals percentage change in quantity demanded divides percentage change in price. The price elasticity of demand equals percentage change in quantity demanded divides percentage change in price. If we just ignore the sign and just concern about the value , the price elasticity of demand and the price elasticity of supply(as a symbol ε) can be classified into three types. When ε >1, it is elastic. When ε <1, it is inelastic. When ε = 1,it is unit elastic. By using the difference of total consumer expenditure(TE) and the total revenue(TR), it can tell the impact magnitude of the impact from market intervention. TE = P × Q . When it is elastic demand, if the price rises, quantity falls proportionately more and therefore TE falls. If the price falls,…...

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