07___Ch_06___Econ_101 - Econ 101 Introduction to...

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  Econ 101 Introduction to Microeconomics Professor Richard V. Burkhauser 6 6 Supply, Demand, and Government Policies
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Econ 101 – Professor Burkhauser Key Concepts price ceiling, p. 114 price floor, p. 114 incidence of a tax, p. 124
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Econ 101 – Professor Burkhauser Question 6.1: In the presence of rent control, as we move from the short run to the long run, we should expect the shortage of apartments to: a) increase as the supply curve for apartments becomes more elastic b) increase as the supply curve for apartments becomes more inelastic c) decrease as the supply curve for apartments becomes more elastic d) decrease as the supply curve for apartments becomes more inelastic
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Figure 6.1 Rent Control in the Short Run and in the Long Run (a) Rent Control in the Short Run Quantity of Apartments 0 Rental Price of Apartment Controlled rent Set at equilibrium level p 0 S 0 q 0 D 1 (old+new) D 0 p 1 A Short run housing shortage q 1 B
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Figure 6.2 Rent Control in the Long Run (b) Rent Control in the Long Run S 0 Controlled rent D 0 D 1 B S 1 (Long Run) A Quantity of Apartments 0 Rental Price of Apartment p 0 p 1 q 0 q 1 q 2 Long run housing shortage
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Econ 101 – Professor Burkhauser Question 6.2: Historically, the effect of rent ceilings in New York City since World War II has been to: a) eliminate discrimination among tenants b) increase maintenance expenditures on rental properties c) induce the construction of an excess number of apartment buildings d) ensure that no potential renters are worse off than they would have been without controls e) transfer wealth from landlords to long-term tenants
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Econ 101 – Professor Burkhauser Question 6.3: On the basis of supply and demand analysis, you could reasonably predict that one effect of the minimum wage law would be to: a) increase the number of people employed b) raise the total wage payments to workers c) reduce the total wage payment to workers d) cause some people to lose their jobs
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Figure 6.3 Labor Market Equilibrium without Minimum Wage Quantity of Labor Wage 0 Labor demand Labor Supply Equilibrium employment Equilibrium wage
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07___Ch_06___Econ_101 - Econ 101 Introduction to...

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