ECO 1104 Lecture Notes - Hectare, Peanut Butter, Price Ceiling

• School: University of Ottawa
• Department: Economics
• Course: ECO 1104
• Professor: David Gray

Document Summary

This is a regulated price designed to protect the interests of consumers. The government dictates a maximum price for a commodity. Example rent control laws (figure 6. 3) It intervenes in the housing market to provide affordable housing. If the price ceiling lies below the equilibrium rent, a situation of excess qd for housing emerges. The shortage causes upward pressure on rents, and other perverse effects. Other perverse effects: outrageous parking and key charges. Quebec universities are being squeezed as tuition and grants are almost frozen. Fairly high cost pressure exists, especially on salaries and maintenance of it. This means that quantity supplied (especially on a per-student basis) is falling, at least in terms of the quality of education. So the university tries to find other ways of raising revenue, sometimes by nickelling and diming its students. These unpopular policies may be annoying, but it is extremely rational from an economics perspective.