Economics 1021A/B Chapter Notes - Chapter 6: Social Cost, Pay-As-You-Earn Tax, Price Floor
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ECON 1021A/B Full Course Notes
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Price ceiling/price cap: a government regulation that makes it illegal to charge a price higher than a specified level. The effects of a price ceiling on a market depend on whether the ceiling is imposed at a level above/below the equilibrium price. Above no effect (doesn"t constrain market forces; force of law and market forces aren"t in conflict) Below powerful effects (attempts to prevent price from regulating the quantities demanded and supplied; force of law and market forces in conflict) Price ceiling applied to a housing market is rent ceiling controls only the rent portion of the cost of housing. When rent is at equilibrium, quantity of housing supplied = quantity of housing demanded. When rent is below equilibrium, quantity of housing supplied < quantity of housing demanded (shortage) Search activity: time spent looking for someone with whom to do business.