ECON 102 Lecture Notes - Lecture 9: Price Gouging, Price Ceiling, Economic Equilibrium
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ECON 102 Full Course Notes
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Price controls: prevent the price from moving towards equilibrium, government-mandated minimum or maximum prices, price ceiling, legal maximum price, meant to help consumers, pc. Binding price ceiling: pc occurs below p* on a graph, prevents prices from reaching equilibrium, legal prices are below pc. Nonbinding price ceiling: pc occurs above p* on a graph, this is ineffective. If (market price) < p: then qd > qs, black markets. The policy of controlling rents (price ceiling: rent is paid each month to a landlord, functions of rental prices, promote maintenance and construction, allocate housing, housing is a scarce good. Idea behind rent control: people are poor, people need housing, make housing cheaper by using rent control, however, rent controls discourage construction! Attempts to evade rent controls: forcing tenants to leave, deposits, key money, required furniture, required cleaning rentals, subletting apartments, other non-re(cid:374)t (cid:862)fees(cid:863) or (cid:271)ri(cid:271)es to (cid:373)ake up for lost re(cid:448)e(cid:374)ues. Is this the best way to allocate: probably not.
