ECON 1000 Chapter Notes - Chapter 6: Price Ceiling, Deadweight Loss, Economic Equilibrium
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ECON 1000 Full Course Notes
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A regulation that makes it illegal to charge a price higher than a specified level. A price ceiling applied to housing markets is called a rent ceiling. A price(rent) ceiling may be imposed at a level that is above or below the equilibrium price(rent). Frustrated renters spent time searching: a black market for housing may develop. Black market: an illegal market in which the price exceeds the legally imposed price ceiling. In an unregulated market, the rent is determined when the quantity demanded equals the quantity supplied. Marginal social benefit equals marginal social cost (resources are allocated efficiently). In a regulated market, there is a deadweight loss. This is so because the quantity of housing is less than the competition quantity. Producer surplus and consumer surplus are not maximized. The loss is shared by both the consumers and the producers. A regulation that makes it illegal to pay a lower price than a specified level.