ECON 1B03 Lecture 7: Ch 5-6 H

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erincat447

10 Jun 2018

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Government Policies: Price Controls II

Numerical Example

- The equations for demand and supply for one-bedroom apartments are:

o Qd = 1700 – 2P

o Qs = 2P – 900

What is equilibrium rental price and apartments rented

In eqm, Qd = Qs

1700 – 2P = 2P – 900

P = 650

Q = 400

What if the province imposes a rent ceiling of $500

If P = $500

Qd = 1700 – 2(500) = 700

Qs = 2(500) – 900 = 100

Shortage = 600 apartments

Price Ceilings can lead to:

- Shortages that worsen over time (2 examples ago)

- Inefficient allocation to consumers

o People who want the good badly may not get it while those who care less do

- Wasted resources

o You sped a lot of tie trig to fid a apartet, leae ork earl…

- Inefficiently low quality

o No incentive for landlords to keep up apartments if they have to rent them cheaply

- Black markets

o Example: the ladlord ight sa ill ret ou a apartet if ou slip e a etra $5

a oth uder the tale

o Illegal but occur often

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ECON 1B03 Full Course Notes

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The equations for demand and supply for one-bedroom apartments are: qd = 1700 2p, qs = 2p 900. What is equilibrium rental price and apartments rented. What if the province imposes a rent ceiling of . Shortages that worsen over time (2 examples ago) Inefficient allocation to consumers: people who want the good badly may not get it while those who care less do. Wasted resources: you spe(cid:374)d a lot of ti(cid:373)e tr(cid:455)i(cid:374)g to fi(cid:374)d a(cid:374) apart(cid:373)e(cid:374)t, lea(cid:448)e (cid:449)ork earl(cid:455) . Inefficiently low quality: no incentive for landlords to keep up apartments if they have to rent them cheaply. Black markets: example: the la(cid:374)dlord (cid:373)ight sa(cid:455) (cid:862)ill re(cid:374)t (cid:455)ou a(cid:374) apart(cid:373)e(cid:374)t if (cid:455)ou slip (cid:373)e a(cid:374) e(cid:454)tra (cid:1004)(cid:1004) a (cid:373)o(cid:374)th u(cid:374)der the ta(cid:271)le(cid:863) Example: agricultural price floors on wheat: the go(cid:448)er(cid:374)(cid:373)e(cid:374)t (cid:449)a(cid:374)ts to e(cid:374)sure that (cid:449)heat far(cid:373)ers re(cid:272)ei(cid:448)e a (cid:862)fair(cid:863) pri(cid:272)e so that they remain profitable and keep growing wheat.

Related Questions

Who bears the primary costs of a rent control program?

landlords

renters that get rent-controlled apartments

taxpayers

the wealthy

Assume the demand for sushi is Qd = 180 - 3P, where Qd is quantity demanded and P = price in dollars. The supply of sushi is Qs = 80 + 5P, where Qs is quantity supplied (and P is, again, price in dollars). A price of $20 would result in:

	A.	Excess supply of 60
	B.	Excess supply of 120
	C.	Excess supply of 140
	D.	Excess demand of 140

US agricultural price supports are politically popular because

They have no adverse impacts

The US would have food shortages without them

The benefits accrue to a large number of voters and the costs are paid by a small number of voters

The costs are spread out among millions of people

	A.	$15.50
	B.	$12.50
	C.	$10
	D.	$15

Price floors and ceiling prices:

cause the supply and demand curves to shift until equilibrium is established.

both cause surpluses.

interfere with the rationing function of prices.

A change in the price of a good leads to a change in ________, which leads to a ___________

quantity supplied; shift of the supply curve

supply; shift of the supply curve

quantity supplied; movement along the supply curve

When the supply of a product increases, this implies that

the price of the product first declined

more will be purchased at the same price

producers will be willing to accept a lower price for each unit sold

demand for the good must have increased

producers will offer less for sale at each possible price

If there is a excess demand for product X:

fewer resources will be allocated to the production of this good.

the price of the product will rise.

the supply curve will shift to the left and the demand curve to the right, eliminating the shortage.

the price of the product will decline.

Which of the following will occur when there is a simultaneous decrease in demand and a decrease in supply?

B and D both necessarily occur

An increase in equilibrium quantity

A and C both necessarily occur

An increase in price

A and D both necessarily occur

A decrease in price

A decrease in equilibrium quantity

Velcro is becoming more and more popular for a variety of uses, including as fasteners for shoes. What should happen to the equilibrium price and quantity for shoelaces as a result?

Both price and quantity should decrease.

Price should increase and quantity decrease.

Both price and quantity should increase.

Price should decrease and quantity increase.

Nothing.

If the government imposes a ceiling price on apartment rents, we would expect to observe all of the following except one. Which is the exception?

	A.	conversion of some apartment complexes to condos
	B.	a shortage
	C.	an increase in the number of new apartment complexes being built
	D.	lower maintenance of existing apartments
	E.	long waiting lists for apartment seekers

supply; movement along the supply curve

both cause shortages.

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ECON 1B03 Lecture 7: Ch 5-6 H

ECON 1B03 Full Course Notes

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