Economics 1021A/B Chapter Notes - Chapter 6: Deadweight Loss, Lux, Llers

• School: Western University
• Department: Economics
• Course: Economics 1021A/B
• Professor: Emilie Rivers

Document Summary

How a rent ceiling creates a housing shortage. Supply curve: measures the marginal social cost of labour to workers. Govt regulation that makes it illegal to charge a price higher than a specified level. Force of law + market forces don"t conflict. Below the =um price: prevents price from regulating q d and q s. forces in conflict. Rent set below =um rent: q of housing demanded exceeds q supplied. Time spent looking for someone with whom to do business. Do this allocation method when there is a shortage of housing. Opportunity cost also includes the time spent finding the good. Oc = rent (regulated price) + time + other recourses spend looking: a black market. Loose ceiling enforcement black market rent is close to unregulated rent. Strict black market rent = maximum price the renter is willing to pay. Rent ceiling below =um results in an inefficient underproduction of housing services.