AREC 202 Lecture Notes - Lecture 12: Deadweight Loss, Taxicabs Of The United States
30 Sep 2016
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Thursday, september 29, 2016 week 6 day 2. Price oors: sometimes governments intervene to push market prices up instead of down, the minimum wage is a legal oor on the wage rate, which is the market price of labor. Employees are the supply and employers are the demand: just like price ceilings, price oors are intended to help some people but generate predictable and undesirable side effects, the effects of a price oor. How price oors cause inef ciency: deadweight loss from inef ciently low quantity. Thursday, september 29, 2016: inef cient allocation of sales among sellers, wasted resources, inef ciently high quality, temptation to break the law by selling below the legal price. Costs of quantity controls: deadweight loss, incentives for illegal activities (example: dangerous unlicensed cab drivers), but note: quota are good for certain markets with market failures ( sheries, cap- and-trade for pollutants, etc.
