CAS EC 101 Study Guide - Midterm Guide: Shortage, Deadweight Loss, Economic Equilibrium

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

Document Summary

Competition, efficiency in a perfectly competitive equilibrium, every firm is a price-taker. Individual supply curves only exist for price-taker firms, not price-setter. The social surplus that"s missing is called deadweight loss. Goods with lowest mc go to ppl with highest wtp. Price ceiling (effective if below equilibrium price) Price floor (effective if above equilibrium price) Taxes and subsidies applied to specific goods and services. Decline in number and quality of new apartments. When the prevailing price creates excess demand, so that the price does not determine who gets what. Raising or lowering the price with price controls, causes a fall in quantity sold. If price controls reduce the price, then there"s excess demand and nonprice rationing. If goods are obtained by those with highest wtp, the only dwl is the area of the triangle. If foods are obtained by those with low wtp, there will be more dwl and social surplus is reduced even more.