ECON 1000 Lecture Notes - Lecture 6: Price Ceiling, Economic Equilibrium, Price Floor
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Price ceiling/cap - a regulation that makes it illegal to charge a price higher than a specified level. A price ceiling set above the equilibrium price has no effect. price ceiling below the equilibrium price has powerful effects on a market. The reason is that the price ceiling attempts to prevent the price from regulating the quantities demanded and supplied. Rent ceiling - a regulation that makes it illegal to charge a rent higher than a specified level. A rent ceiling set below the equilibrium rent creates: Search activity - the time spent looking for someone with whom to do business. Black market - an illegal market in which the equilibrium price exceeds the legally imposed price ceiling. Price floor - a regulation that makes it illegal to trade at a price lower than a specified level. Price floor set below the equilibrium price has no effect.