Economics 1021A/B Chapter Notes - Chapter 6: European Route E6

• School: Western University
• Department: Economics
• Course: Economics 1021A/B
• Professor: Bruce Hammond

Document Summary

Ls long run supply as price goes out more units will get built. Rent ceilings set below equilibrium price attempts to prevent the price from regulating quantity demanded and supplied, creates a shortage, increased search activity and a black market. Housing shortage - quantity available is quantity supplied since the price is capped. In a strictly regulated price ceiling, the black market price is whatever the renter is willing to pay (since seller wants to rent to highest bidder), so the price gets driven up by worthless fittings, i. e. a lock fee. Fair results yes, makes it easier for those with less money blocks a transaction between willing parties. Inefficiencies quantity of labour employed is less than efficient quantity (because price per hour is too high), there is a deadweight loss. Firm"s surplus shrinks (has to pay more for labour) and the potential loss form job searching.