econ101 ch4 notes

econ101 ch4 notes - 2. dealer pays you $100 for it 3....

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
implications of a shortage (eg, from price ceiling): 1. formation of queues (lines) 1. increases economic cost to the consumer 2. formation of secondary markets (“black markets”) 1. resale at higher prices 2. potentially enhances efficiency: 1. gets commodity into hands of those who value it the most (unlike price controls) 3. Add-ons and trade-ins become part of price 1. ex. price ceiling in WWII 2. max legal price for new car: $1400 1. suppose you have used a car worth $500
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 2. dealer pays you $100 for it 3. effective price of new car is $1800 1. violates spirit of the law 3. wage freeze 1. health insurance paid as fringe benefit 4. ex Israeli price ceiling on rental units 1. landlords charge $800 per key 4. facilitates discrimination 1. rent controlled apartments 1. excess D -> landlords choose who to rent to based on personal tastes...
View Full Document

Ask a homework question - tutors are online