CAS EC 101 Chapter Notes - Chapter 11: Price Controls, Price Ceiling, Competitive Equilibrium

• School: Boston University
• Department: Economics
• Course: CAS EC 101
• Professor: Michael Manove

Document Summary

Babies: most economists thing some interference in markets is necessary. Government intervention: can government intervention into competitive markets create outcomes that are more acceptable to members of society, forms of government intervention. Taxes and subsidies applied to specific goods and services. Income and wealth distribution: price controls an attempt to increase equity by using prices that transfer surplus from (rich) sellers to (poor) buyers (or the other way around) Large efficiency loss when surplus is transferred. Most economists argue that it is more efficient to transfer money from rich to poor without directly interfering with market mechanisms. Government intervention into markets: frequently large groups of people are unhappy with market-equilibrium price, governments may intervene to place upper limits or lower limits on prices, rent controls (price ceiling): most common during wars. Positive effects help poor families, soften the effects of economic shock (job loss), prevent neighborhoods from becoming mostly rich and prevent poor people from moving to bad neighborhoods.