ECON101 Lecture Notes - Lecture 1: Price Ceiling, Price Floor, Economic Equilibrium

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coffeesea-lion820

13 Dec 2017

School

University of Alberta

Department

Economics

Course

ECON101

Professor

Alexander Gainer

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ECON101 Full Course Notes

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Lower rents would be cheaper to house people. Rent control is a type of price ceiling. Price ceiling is stopping prices to go any higher. Minimum wage is a type of price floor. Price floor is stopping prices from going any lower. When a price ceiling is above the equilibrium price, we say it is not binding and it has no effect on the market (means no one really cares about it). But when price ceiling is below equilibrium level, it is a binding constraint. In case of apartments, the quantity demanded will increase, quantity supplied will decrease, therefore there will be a shortage. In the long run, supply and demand become more price elastic. Toronto is the latest city affected by rent control. Apartments may be changed into condos and sold. So, uber should be encouraged to increase prices during peak hours. So, there are more drivers on the road.

Related Questions

Question 1

The shortage in apartments causes by rent control is worse...

		In the long-run, because the long-run supply is more elastic.
		In the long-run, because the long-run supply is less elastic.
		In the short-run, because the short-run supply is more elastic.
		In the short-run, because the short-run supply is less elastic.

2 points

Question 2

Airline regulation of the 1970s produced a similar result to which of the following government interventions?

		Communism
		Rent control laws
		The Affordable Care Act
		Minimum wage laws

2 points

Question 3

What is a price floor?

		A maximum price allowed by law.
		A minimum price allowed by law.
		A maximum price consumers are willing to pay.
		A minimum price consumers are willing to pay.

2 points

Question 4

In 1938, Congress set the first minimum wage at $0.25 per hour. While this was a modest price floor for the country, it was a very large increase for what US territory which was not exempt from the law?

		Arizona
		Puerto Rico
		Cuba
		Hawaii

2 points

Question 5

Which of the following is a possible effect of a price ceiling?

		A surplus of the good.
		Increases in product quality.
		Increased gains from trade.
		People will waste time in lines waiting to purchase the good.

2 points

Question 6

Which of the following is a possible effect of a price floor?

		Decreases in product quality.
		The quantity supplied exceeds the quantity demanded.
		Increased gains from trade.
		A shortage of the good.

2 points

Question 7

Which of the following is a possible effect of a price ceiling?

		Increased gains from trade.
		Increases in product quality.
		A surplus of the good.
		The quantity demanded exceeds the quantity supplied.

Suppose that the demand and supply schedules for rental apartments in the city of Gotham are as given in the table below.

Monthly Rent	Apartments Demanded	Apartments Supplied
$2500	10,000	15,000
2000	12,500	12,500
1500	15,000	10,000
1000	17,500	7500
500	20,000	5000

a. What is the market equilibrium rental price per month and the market equilibrium number of apartments demanded and supplied?

b. If the local government can enforce a rent-control law that sets the maximum monthly rent at $1500, will there be a surplus or a shortage? Of how many units? And how many units will actually be rented each month?

c. Suppose that a new government is elected that wants to keep out the poor. It declares that the minimum rent that can be charged is $2500 per month. If the government can enforce that price floor, will there be a surplus or a shortage? Of how many units? And how many units will actually be rented each month?

pucetrout547

suppose that the demand and supply schedules for rental apartments in the city of Gotham.

Monthly Rent	Apartments Demanded	Apartments Supplied
$2500	10,000	15,000
2000	12,500	12,500
1500	15,000	10,000
1000	17,500	7500
500	20,000	5000

a. What is the market equilibrium rental price per month and the market equilibrium number of apartments demanded and supplied?

b. If the local government can enforce a rent-control law that sets the maximum monthly rent at $1500, will there be a surplus or a shortage? Of how many units? And how many units will actually be rented each month?

c. Suppose that a new government is elected that wants to keep out the poor. It declares that the minimum rent that can be charged is $2500 per month. If the government can enforce that price floor, will there be a surplus or a shortage? Of how many units? And how many units will actually be rented each month?

blushsardine940

ECON101 Lecture Notes - Lecture 1: Price Ceiling, Price Floor, Economic Equilibrium

ECON101 Full Course Notes

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