ECON 1000 Chapter Notes - Chapter 6: Price Ceiling, Wage Labour, Economic Equilibrium

• School: York University
• Department: Economics
• Course: ECON 1000
• Professor: Avi Cohen

Document Summary

127-137) government actions in markets (econ 1000) Price ceiling = govt regulation making it illegal to charge a price higher specified. Pc above equilibrium has no effect (pc doesn"t constrain the market forces) Pc below equilibrium attempts to prevent the price from regulating the quantities demanded & supplied. Rent ceiling below equilibrium creates: housing shortage, increased search activity & black market. Rent ceiling below equilibrium sees a shortage of housing. Search activity = time spent looking for someone with whom to do business. Opp. cost of a good is equal not only to its price & value of the search time spent finding it. Black market = illegal market in which equilibrium price exceeds the price ceiling. Level of black market depends on tight control of market. Rent ceilings forces landlords to look at ways to increase rent. Rent ceiling below equilibrium = inefficient underproduction of housing services. Msb exceeds msc & deadweight loss shrinks producer & consumer surplus.