ECO 211 Study Guide - Economic Equilibrium, Supply Shock, Demand Curve
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ECO 211 Full Course Notes
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Explain how price ceilings create shortages and inefficiency (example, rent control) Explain how price floors create surpluses and inefficiency (example, minimum wage) w minimum wage is symbolic. Supply shock: san francisco, april 18, 1906. The market response to a decrease in supply. In the short run, the equilibrium price of housing rose as the equilibrium quantity fell. People economized on their use of space, making spare rooms available for rent. These short-run adjustments increased the supply of housing. In the long run, the city was rebuilt. The supply curve shifted out, reflecting the increased long-run housing supply. As housing became more plentiful once again, prices returned to previous levels. Price ceilings are regulations that make it illegal to charge a price higher than a specified level. Rent ceilings (sometimes called rent control) are price ceilings applied to housing markets. Rent ceilings set above equilibrium have no effect. Rent ceilings set below equilibrium prevents price from regulating the quantities supplied and.
