ECON101 Chapter Notes - Chapter 6: Price Ceiling, Tax Incidence, Economic Equilibrium
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ECON101 Full Course Notes
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Intervenes to make a good more affordable: price ceiling attempts to prevent the price from regulating the quantities demanded and supplied, force of the law and market forces are in conflict. Inefficiency of a rent ceiling: underproduction of housing services, marginal social benefit exceeds the marginal social cost and a deadweight loss shrinks the consumer surplus and producer surplus, quantity of housing supplied is less than the efficient quantity. Fair-rules view: anything that blocks voluntary exchange is unfair: rent ceilings are unfair since landlords are getting less than what they want. Supply curve measures the marginal social cost of labour to workers, cost is leisure foregone. Income tax, social security is deducted from earnings, hst and gst are added to bills. Taxes: employers pay social security taxes such as employment insurance tax. Sellers respond to this price: tax acts like a wedge between price that buyers pau and price sellers receive.