ECON101 Chapter Notes - Chapter 6: Price Ceiling, Deadweight Loss, Tax Incidence

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pucecoyote5

17 Jun 2017

School

University of Waterloo

Department

Economics

Course

ECON101

Professor

Maria Viola

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ECON101 Full Course Notes

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Government regulation that makes it illegal to charge a price higher than a specified level is called a price ceiling or price cap. Price ceiling set above the equilibrium does not have any effect: price ceiling does not constrain the market forces. Price ceiling below the equilibrium price has powerful effects on a market: price ceiling attempts to prevent the price from regulating the quantities demanded and supplied. A rent ceiling is a price ceiling applied to a housing market. Quantity demanded equals quantity supplied and when rent is at equilibrium, quantity of housing supplied equals the quantity of housing demand: neither a shortage or surplus of housing. Rent set below the equilibrium rent, the quantity of housing demanded exceeds the quantity of housing supplied shortage. Quantity available is the quantity supplied and somehow this quantity must be allocated among the frustrated demanders: allocated through increased search activity.

Related Questions

1 . Effects of rent control

Rent controls force landlords to price apartments below the equilibrium price level. An immediate effect is a shortage (excess demand) of apartments, because the quantity of apartments demanded is greater than the quantity supplied at the regulated price.

When cities prevent landlords from charging market rents, which of the following are common long-run outcomes? Check all that apply.

The future supply of rental housing units increases.

The quantity of available rental housing units falls.

The quality of rental housing units falls.

Nonprice methods of rationing emerge.

blackcoyote423

When cities prevent landlords from charging market rents, which of the following are common long-run outcomes? Check all that apply.

The future supply of rental housing units increases.

Efficient use of housing space results.

Nonprice methods of rationing emerge.

The quantity of available rental housing units falls.

Question 1

The shortage in apartments causes by rent control is worse...

		In the long-run, because the long-run supply is more elastic.
		In the long-run, because the long-run supply is less elastic.
		In the short-run, because the short-run supply is more elastic.
		In the short-run, because the short-run supply is less elastic.

2 points

Question 2

Airline regulation of the 1970s produced a similar result to which of the following government interventions?

		Communism
		Rent control laws
		The Affordable Care Act
		Minimum wage laws

2 points

Question 3

What is a price floor?

		A maximum price allowed by law.
		A minimum price allowed by law.
		A maximum price consumers are willing to pay.
		A minimum price consumers are willing to pay.

2 points

Question 4

In 1938, Congress set the first minimum wage at $0.25 per hour. While this was a modest price floor for the country, it was a very large increase for what US territory which was not exempt from the law?

		Arizona
		Puerto Rico
		Cuba
		Hawaii

2 points

Question 5

Which of the following is a possible effect of a price ceiling?

		A surplus of the good.
		Increases in product quality.
		Increased gains from trade.
		People will waste time in lines waiting to purchase the good.

2 points

Question 6

Which of the following is a possible effect of a price floor?

		Decreases in product quality.
		The quantity supplied exceeds the quantity demanded.
		Increased gains from trade.
		A shortage of the good.

2 points

Question 7

Which of the following is a possible effect of a price ceiling?

		Increased gains from trade.
		Increases in product quality.
		A surplus of the good.
		The quantity demanded exceeds the quantity supplied.

ECON101 Chapter Notes - Chapter 6: Price Ceiling, Deadweight Loss, Tax Incidence

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