CAS EC 101 Lecture Notes - Lecture 11: Pareto Efficiency, Competitive Equilibrium, General Medical Services

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

Document Summary

Price controls and other legal interventions: price ceiling (effective if below equilibrium price) Government set maximum price (rent control: price floor (effective if above the equilibrium price) Government-set minimum price (minimum wage: in the past, these were common market interventions, even in wealthy countries, but they are less common now. Nonprice-rationing mechanisms: occurs when the prevailing price creates excess demand and does not determine who gets what, many possible mechanism can be used for non-price rationing. Nonprice rationing advantages: in situations of uncertainty and danger, nonprice rationing may be safer than markets. Distributions of food during wars or famines. Vaccines to prevent disease: may increase efficiency when people pay less than the cost. General medical services: in emergencies, nonprice rationing may work faster than markets. Nonprice rationing disadvantages: no efficient, people with lower wtp may be more successful at obtaining goods than those with higher wtp. Lowers consumer surplus: costly to use.