ECO101H1 Chapter Notes - Chapter 5, 7: Price Ceiling, Price Floor, Efficient-Market Hypothesis
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ECO101H1 Full Course Notes
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Document Summary
In pharmaceuticals, patents give drug companies exclusive rights, but government imposes a price ceiling. Government uses power of large volumes of drugs to negotiate prices well below price ceiling. Sharp increase in demand for aluminum, steel, sugar, milk, coal during wwii. Non-binding price ceiling is above or at equilibrium, does not cause shortage. Deadweight loss: loss in total surplus because of action or policy that reduces quantity transacted below efficient market equilibrium quantity. Minimum deadweight loss assumes those supplying are those buying are those with highest benefit and those supplying are those with lowest cost. Is not the same as transfer of surplus, where one person loses surplus to another. People who are less in need might get the product over those who have greater need/higher benefit. Missed opportunity to make parties better off at no additional cost. People spend money, effort, time looking for artificially scarce resources. Time that could be spent doing other things.
