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ECON 1050 Lecture Notes - Economic Surplus

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silverchimpanzee502

5 Mar 2012

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Document Summary

Disruption of market equilibrium by government intervention within the economy: rent ceilings lead to inefficiency and housing shortages, minimum wage taxes, subsidies, and production limits. Price ceiling (price cap): regulation instating a maximum price on a product rent ceiling: price cap applied to a housing market: rent ceiling set above the equilibrium rent has not effect. Because the legal price cannot eliminate the shortage, other mechanisms operate: With a housing shortage, people are willing to pay up to. 2010 pearson education canada: search activity. Oc of housing = regulated rent + oc of unregulated search activity search activity: time spent looking for someone with whom to do business: search activity is costly. Price regulation causes search activity: black market. Black market: illegal market that operates alongside a legal market in which a price restriction has been imposed. A housing market with a rent ceiling rent ceiling under equilibrium underproduction.

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Related Questions

A price ceiling is binding when it is set

a. above the equilibrium price, causing a shortage

b. above the equilibrium price, causing a surplus

c. below the equilibrium price, causing a shortage

d. below the equilibrium price, causing a surplus

orchidrabbit535

In a housing market with an effective rent ceiling:

a. all landlords gain and the deadweight loss is borne by consumers who can't find housing.

b. all consumer surplus is eliminated by costs incurred through search activity.

c. all consumers who can't find housing at controlled rent gain.

d. all consumers gain and the deadweight loss is borne by landlords who can't supply housing at lower prices.

In a housing market with an effective rent ceiling ___________

A. All landlords gain, and the deadweight loss is borne by the consumers who can't find housing.

B. All consumer surplus is eliminated by the costs incurred through search activity.

C. Consumers who do find housing at the controlled rent gain.

D. All consumers gain, and the deadweight loss is borne by the landlords who can't supply housing at the new lower price.