ECON 1000 Chapter Notes - Chapter 6: Price Ceiling, Economic Equilibrium, Opportunity Cost

• School: York University
• Department: Economics
• Course: ECON 1000
• Professor: Karen Bernhardt-Walther

Document Summary

Increased search time: search time is the spent looking for someone with whom to do business with, when a price is regulated, search activity increases substantially. Loose enforcement means that black market prices will be closer to the unregulated price. Tight enforcement means that black market prices will be equal to the maximum price a buyer is willing to pay. Inefficiency of a rent ceiling: a rent ceiling below the equilibrium rent results in underproduction of housing services. The marginal social benefit exceeds the marginal social cost: are rent ceilings fair, according to the fair-rules view, anything that blocks voluntary exchange is unfair, so rent ceilings are unfair. But according to the fair-result view, a fair outcome is one that benefits the less well off, so the fairest outcome is the one that allocates scarce housing to the poorest. Lotteries allocate housing to those who are lucky, not to those who are poor.