ECON-221 Lecture Notes - Lecture 15: Perfect Competition, Rent Regulation, Price Ceiling

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6 Aug 2020
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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.

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