ECON 103 Chapter : ECON103 Problem Set 4.pdf

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The statement that trade occurs when two people value different goods equally. If the rent control law in the area is loose, then it is more likely that landlords will use that opportunity to earn surplus money by renting out housings resulting in reaching equilibrium faster. However, if the rent control law in the area is strict, the value the landlord would receive back from renting the housing out is lower than the value s/he places on the room. This would result in the equilibrium taking longer to reach. The clich one man"s junk is another man"s treasure reflects upon the theorem of exchange, at which all gains from trade are exhausted at the margin. Let"s say person a has object o that person b values at person a values this object at . A maximized his seller"s surplus to while b maximized his consumer"s surplus to .

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