ECON101 Lecture Notes - Lecture 4: Equilibrium Point, Production Quota, Economic Surplus

• School: University of Waterloo
• Department: Economics
• Course: ECON101
• Professor: Zara Liaqat

Document Summary

A price ceiling or price cap is a regulation that makes it illegal to charge a price higher than a. A housing market with a rent ceiling specified level. When applied to a housing market it is called rent ceiling if set above the equilibrium rent it has no effect. As if there was no ceiling but if is set below, has powerful effects. Inefficiency of a rent ceiling a rent ceiling set below the equilibrium tent leads to an inefficient underproduction of housing services the marginal social benefit from housing services exceeds its marginal social cost and a deadweight loss arises . A rent ceiling decreases the quantity of housing supplied to less than the efficient quantity. There is a potential loss from increased search activity. According to the fair rules view, a rent ceiling is unfair because it blocks voluntary exchange and because it does not generally benefit the poor.