EC 201 Lecture Notes - Lecture 5: Gout, Economic Surplus, Deadweight Loss
25 Apr 2018
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Government legal restrictions on how high/low a market price may go. Price ceilings = max price sellers are allowed to charge for a good or service. Imposed during = crises, wars, harvest failures, natural disasters, policy. Us gov imposed on aluminum and steel during ww2. Price floors = min price buys are req to pay for a good/service. Deadweight loss = loss the total surplus that occurs whenever an action/policy reduces the quantity transacted below the efficient market equilibrium quantity. Gout policy = price ceiling on rental housing * rent control* Inefficient allocation to consumers: some consumers get the good and others don"t. Inefficiently low quality = sellers offer low-quality goods @ low price even though buys would prefer a higher quality. Incentive to form a black market = goods/services are bought and sold illegally. Gov can push market prices up instead of down. = min price buyers are req to pay for a good/service.
