ECON101 Chapter Notes - Chapter 6: Price Ceiling, Economic Equilibrium, Social Cost

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ECON101 Full Course Notes
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ECON101 Full Course Notes
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A government regulation that makes it illegal to charge a price higher than a specified level: price ceiling or price cap. A price ceiling set above the equilibrium price no effect (b/c the force of the law and the market forces are not in conflict) When a price ceiling is applied to a housing market: rent ceiling. A rent ceiling set below the equilibrium rent causes: In a housing market, when the rent is at the equilibrium level, the quantity of housing supplied equals the quantity of housing demanded no shortage, no surplus of housing. But at a rent set below the equilibrium rent, the quantity of housing demanded exceeds the quantity of housing supplied shortage. When there is a shortage, the quantity available is the quantity supplied, and somehow this quantity must be allocated among the frustrated demanders: one way in which this allocation occurs is through increased search activity.

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