Economics 1021A/B Lecture Notes - Price Ceiling, Economic Equilibrium, Social Cost

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A rent ceiling set above the equilibrium rent is ineffective.
An effective rent ceiling creates an inefficient outcome because at the rent ceiling marginal social
benefit exceeds marginal social cost.
When the rent ceiling is set below the equilibrium rent, the rent ceiling constrains the market forces.
A rent ceiling results in a shortage of housing only when the rent ceiling is below the equilibrium rent.
With an effective rent ceiling, housing is allocated by a method other than price. Search activity
increases and black markets arise.
When the rent ceiling is set above the equilibrium rent, the quantity of housing rented is the equilibrium
quantity. This results in no shortage.
When the rent ceiling is below the equilibrium price, the price of the rent is above the equilibrium, left
side where two points on graph meet the line.
A rent ceiling never creates a surplus of housing – creates 0 shortage when it is sent below the
equilibrium price, and a shortage when it is above.
If a market is in equilibrium, then the price ceiling decreases the quantity of fertilizer supplied and
increases the quantity of fertilizer demanded.
When the price ceiling is below eq. Price, some consumers are better off and all producers are worse
off.
A minimum wage is price floor in the labour market.
When workers leave to find jobs elsewhere, the supply curve shifts leftward.
A tax is efficient when supply is perfectly inelastic or demand is perfectly inelastic.
The supply of a farm crop is perfectly inelastic at the quantity
A production quota is inefficient because at the quantity produced marginal social benefit exceeds
marginal social cost.
When there is a penalty imposed for selling the illegal good, supply decreases.
When a penalty is imposed for possessing the illegal good, demand decreases,
When the penalty imposed on sellers is greater than the penalty imposed on buyers, the price rises.
Incorrect: a black market will not develop if a drug is legalized and taxed.
An effective rent ceiling is unfair by the rules and results view.
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