Econ 281 Chapter10b - Definition A price ceiling is a legal...

Info icon This preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Definition:   A  price ceiling  is a legal  maximum on the price per unit that a  producer can receive.  If the price  ceiling is  below  the pre-control  competitive equilibrium price, then the  ceiling is called  binding
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
2 A price ceiling always has the following effects: Excess demand will exist The market will underproduce Producer surplus will decrease Some  producer surplus is transferred to the  consumer Consumer surplus may increase or decrease There will be a deadweight loss
Image of page 2
3 Price Ceiling Demand Old Consumer Surplus Q P Q* P* A B C D Old Producer Surplus Supply Price Ceiling
Image of page 3

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
4 The impact of a price ceiling depends on  which consumer receive the available good.   We will examine the 2 extreme cases: Consumers with greatest willingness to pay  receive good (maximize consumer surplus) Consumers with least willingness to pay  receive good (minimize consumer surplus)
Image of page 4
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern