Economics 1021A/B Lecture Notes - Lecture 6: Price Ceiling, Opportunity Cost, Deadweight Loss
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ECON 1021A/B Full Course Notes
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Document Summary
A price ceiling or price cap is a regulation that makes it illegal to charge a price higher than a specified level. When a price ceiling is applied to a housing market it is called a rent ceiling. Effects of a price ceiling on a market dependent on whether it is above or below equilibrium price. Price ceiling attempts to prevent the price from regulating the quantity demanded and supplied. If the rent ceiling is set above the equilibrium rent, it has no effect. The market works as if there were no ceiling. But a rent ceiling set below the equilibrium rent creates: When rent is at equilibrium level, the quantity housing supplied=quantity of housing demanded, therefore there is no shortage nor a surplus. Rent set below equilibrium rent, quantity of housing demand exceeds the quantity of housing supplied (shortage) Shortage on housing means the quantity available is the quantity supplied.