ECON 110 Lecture Notes - Lecture 5: Marginal Utility, Perfect Competition, Economic Equilibrium

54 views12 pages
wunch and 39345 others unlocked
ECON 110 Full Course Notes
30
ECON 110 Full Course Notes
Verified Note
30 documents

Document Summary

At q0, marginal benefit is equal to marginal cost. This means, whereas a smaller output would have generated a wedge, a larger output would generate no further benefits. Nb this phenomenon arises only under perfect competition. Other market outcomes, with or without government intervention, are evaluated by a comparison of these surpluses that indicate market performance. In the absence of rent controls, the competitive market outcome is at (q0,r0) where, at rent r0 the quantity demanded and the quantity supplied are equal to q0. Total surplus (aeb) = cs + ps is maximized (cs = aer0 and. Quantity supplied falls to qs in lr as landlords gradually withdraw from market. The new market quantity is determined by the short side of the market at qs. Note that if rent cap is enforced in legal market, the black market price will rise to demand price.

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers
Class+
$8 USD/m
Billed $96 USD annually
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
30 Verified Answers

Related textbook solutions

Related Documents

Related Questions