7th lecture

7th lecture - Economics 101 Lecture 7 The market for any...

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Economics 101 Lecture 7
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The market for any good or service consists of all (actual or potential) buyers or sellers of that good or service.
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A “Competitive” Market Market for a good is the area around which the price tends to be uniform Perfect knowledge of prices Large numbers – lots of buyers and sellers Product homogeneity – i.e., umbrellas when raining versus umbrellas when sunny
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Example 6.2. Should Collegetown Rents Be Regulated?
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Suppose the supply and demand curves for two-bedroom Collegetown rental apartments are as shown. Monthly Rent ($/apartment) Quantity (thousands of apartments per month) 0 2 1000 Demand Supply
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The city council is concerned that many students cannot afford the equilibrium rent of $1000 per month and is considering a regulation forbidding landlords from charging more than $500. What will be the likely consequences of adopting this regulation?
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Monthly Rent ($/apartment) Quantity (thousands of apartments per month) 0 2 1000 Demand Supply 1500 Controlled rent=500 1 3 Excess demand=2000 apartments per month Rent Controls Produce Excess Demand in the Housing Market
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Responses to excess demand in a regulated housing market: finder’s fees key deposits required furniture rental excessive damage deposits curtailed maintenance condominium conversion
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Economics in One Lesson “The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists of tracing the consequences of that policy not merely for one group but for all groups” Henry Hazlitt
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There are much more effective ways to help poor people than to give them apartments and other goods at artificially low prices.
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This note was uploaded on 03/31/2008 for the course ECON 101 taught by Professor Hansen during the Spring '07 term at Wisconsin.

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7th lecture - Economics 101 Lecture 7 The market for any...

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