ECON 1000 Chapter 6: Government Actions in Markets

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Rent ceilings do not necessarily allocate housing to the less well off. Price floor: is a government regulation that places a lower limit on the price at which a particular good, service or factor of production may be traded. But they are not permitted by the minimum wage law to do so. quantity of unemployment equal to the quantity of labour supplied minus the quantity of labour demanded at the equilibrium wage rate. When a minimum wage is set above the equilibrium wage, the minimum wage prevents the wage from regulating the quantities demanded and supplied. The quantity of employment is the quantity of labour demanded at the minimum wage. The number of unemployed at the minimum wage is equal to the difference between the quantity of labour supplied at the minimum wage and the quantity of labour demanded at the minimum wage. Econ1000: chapter 6 notes government actions in markets.

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Consider the market for rental housing in Your town. The demand and supply schedules for rental housing are given in the table.

Price ($ per month)	Quantity Demanded (thousands of units)	Quantity Supplied (thousands of units)
1100	40	80
1000	50	77
900	60	73
800	70	70
700	80	67
600	90	65
500	100	60

In a Free market for rental housing, what is the equilibrium price and quantity?
Now suppose the government in Your town decides to impose a ceiling on the monthly rental price. What is the highest level at which such a ceiling could be set in order to have any effect on the marker? Explain your answer.
Suppose the maximum rental price is set equal to $500 per month. Describe the effect on quantity demanded, supplied, and exchanged in the rental-housing market.
Suppose a black market develops in the presence of the rent controls in part (c). What is the black market price that would exist if all of the quantity supplied were sold on the black market?

harlequincrow283

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

A. Think about a product that you have purchased recently (e.g. soda, diapers, takeout meals, milk, shoes, manicure/pedicure, video game, etc.). Explain how the law of demand affected your purchase. Give specific examples of how the determinants of demand and supply affect this product (T-I-P-E-N and P-R-E-S-T). What happens to the demand curve and the supply curve when any of these determinants change? Give examples of scenarios that would cause a change in demand versus a movement along the same demand curve and supply curve for this product. Discuss the new equilibrium price and quantity that result from these changes. Can you demonstrate some of these changes graphically?

B. For your selected product, if the government places a mandated price ABOVE the equilibrium price, how would this affect the market equilibrium?

C. Would you rather have the forces of demand and supply determine the price of gasoline, or would you prefer a government-mandated price ceiling? What problems would a price ceiling on gasoline bring in this market?

ECON 1000 Chapter 6: Government Actions in Markets

ECON 1000 Full Course Notes

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