Textbook Notes (363,237)
Canada (158,278)
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ECON 1050 (379)
Chapter 6

Economics Chapter 6 Notes.docx

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University of Guelph
ECON 1050
Eveline Adomait

October 2 , 2012 Economics Chapter 6 Notes - government regulation that makes it illegal to chage a price higher than a specified level is called a price ceiling or price cap - if price ceiling is above equilibrium there is no effect, does not constrain market force - price ceiling below equilibrium price attempts to prevent price from regulating the quantities demanded and supplied - price ceiling applied to housing market is called a rent ceiing- when set below equilibrium it creates o housing shortage o increased search activity o black market Housing Shortage - at a rent set below equilibrium, quantity of housing demanded exceeds quantity of housing supplied (shortage) Increased Search Activity - search activity: time spent looking for someone to do business with - spend time in search activity almost every time a purchase is made - increases when a price is regulated and there is a shortage - opportunity cost of a good is equal not only to its price but also to the value of the search time spent finding the good - therefore opportunity cost of housing= rent (regulated price) + time/ resources spent searching for the restricted quantity available Black Market - an illegal market where the equilibrium price exceeds the price ceiling - occur in rent controlled housing and many other markets - loose enforcement- black market r
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