ECON 1B03 Lecture Notes - Lecture 10: Price Ceiling, Rent Regulation

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ECON 1B03 Full Course Notes
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ECON 1B03 Full Course Notes
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Document Summary

In a free, unregulated market system, market forces establish equilibrium prices and quantities: while equilibrium conditions may be efficient, it may be the case that not everyone in society is satisfied and government may want to get involved, the government will freeze prices at a predetermined level they feel will make members of society better off, these are usually enacted when policy makers believe the price is either unfair for the buyers or sellers, price ceiling: is a legal maximum on the price that can be charged for a good, the price ceiling is binding (effective) if set below the equilibrium price, leading to a shortage, the price ceiling is not binding (not effective) if it"s set above the equilibrium (cid:224) market would go to equilibrium regardless, example: rent control; governments goal is to help the poor by making housing more affordable.

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