ECON 1000 Lecture Notes - Lecture 8: Price Ceiling, Rent Regulation, Demand Curve
17 Oct 2016
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Supply, demand and government policies - chapter 6. As an economist we try to understand the way the world works. In chpt 4 we said qd = qs. Suppose one person is concerned consumers pay too much for ice-(cid:272)rea(cid:373) . This person may lobby the gov for a ceiling. Gov puts a ceiling on price of ice-cream. Qd > qs and so there is a shortage ( qd - qs = how sort they are) Policy intended to help ice-(cid:272)rea(cid:373) (cid:271)uyers has (cid:373)ade so(cid:373)e (cid:271)etter off . The people who were willing to pay the higher price. Ceiling - a (cid:272)ap o(cid:374) the pri(cid:272)e it (cid:272)a(cid:374)(cid:374)ot go a(cid:271)o(cid:448)e. Floor- a (cid:272)ap o(cid:374) the pri(cid:272)e it (cid:272)a(cid:374)(cid:374)ot go (cid:271)elow. General point: binding price ceilings imposed in a competitive market leads to a shortage and sellers must ration goods to potential buyers. Opecs oil price hikes of 1970s were blamed for gas shortages. It was a ceiling of the us gov.
