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Lecture

Ch 6 Look Over Econ

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Department
Economics
Course
Economics 1021A/B
Professor
Bruce Hammond
Semester
Fall

Description
Arent 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. Arent 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. Arent 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 t
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