ECON-221 Lecture Notes - Lecture 15: Perfect Competition, Rent Regulation, Price Ceiling
Document Summary
Continue to assume perfect competition with all firms passively setting the same price. What happens to prices, quantities, consumer surplus and producer surplus when prices are regulated: we can use consumer surplus and producer surplus to discuss if these regulations are good or not. Price ceiling = a regulation that sets the maximum price that can be legally paid for a good or service: ex. Minimum wage = governments often impose a minimum wage that firms must pay (certain types of) workers: ex. Doug ford get rid of . 25 price floor for beer lol. Transfer = surplus that moves from producers to consumers or vice versa as a result of a regulation: ex. Rent control may be a transfer from landlords to tenants. Deadweight loss (dwl) = the reduction in total surplus that occurs as a result of market intervention. Nonbinding price ceiling = a price set at a level above the equilibrium market price.
