Lecture 14

Lecture 14 - possibility to get resources lost back. If...

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February 12, 2009 Deadweight loss – decrease the total surplus which might come around from a market out of equilibrium When a rent ceiling creates a housing shortage, 2 developments occur: black market & increased search activity Black market – an illegal market that operates alongside a government-regulated market Search activity – the time spent looking for someone with whom to do business Loss to society is even more than the deadweight loss with the key money & rent ceiling problem What’s the difference between resource loss and deadweight loss? Both are surplus lost due to inactivity but what is different? Deadweight you cannot get back. There’s a
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Unformatted text preview: possibility to get resources lost back. If market is acting the way it should with everyone following the rules, you still have deadweight loss. With a rent ceiling, the outcome is inefficient. Total surplus sum of producer & consumer surplus shrinks and a deadweight loss arises. What if rent ceiling is above the equilibrium price? Invisible hand would push things around. Rent ceiling would be useless because point is lower. EXAM: Chapters 1 6 33 MC questions Bubble in information ahead of time Bring a calculator no recitation, homework, or quiz next week...
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This note was uploaded on 09/29/2009 for the course ECON 101 taught by Professor Balaban during the Spring '07 term at UNC.

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Lecture 14 - possibility to get resources lost back. If...

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