by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How does Imperfect Information Affect Equilibrium Price and Quantity?The presence of imperfect information can discourage both buyers and sellers from participating in the market. Buyers may become reluctant to participate because they cannot determine the...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Imperfect information?Every purchase is based on a belief about the satisfaction that the good or service will provide. In turn, these beliefs are based on the information that the buyer has available. For many products, the information available to the buyer...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Regulatory Capture?One difficulty with government price regulation is what economists call regulatory capture, in which the firms that are supposedly regulated end up playing a large role in setting the regulations that they will follow. When the airline...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Price Cap Regulation?Price cap regulation is where the regulator sets a price that the firm can charge over the next few years. A common pattern was to require a price that declined slightly over time. If the firm can find ways of reducing its costs more...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Cost-Plus Regulation? Cost-plus regulation is where regulators calculate the average cost of production, added in an amount for the normal rate of profit the firm should expect to earn, and set the price for consumers accordingly. This method was known as...
