Chapter 06_Markets in action

Chapter 06_Markets - MARKETS IN ACTION CHAPTER 6 Housing Markets and Rent Ceilings The 1906 earthquake in San Francisco left 200,000 peoplemore

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MARKETS IN ACTION 6 CHAPTER
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Housing Markets and Rent Ceilings The 1906 earthquake in San Francisco left 200,000 people—more than half the city—homeless. By the time the San Francisco Chronicle started publishing again, a month after the earthquake, there was not a single mention of a housing shortage. How did the market achieve this outcome?
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Housing Markets and Rent Ceilings San Francisco housing market before earthquake. Q=100,000 units. P=Rent=$16 a month. Intersection of D and SS .
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Housing Markets and Rent Ceilings Earthquake: supply shifted to SS A . P=Rent=$20 a month. Q=72,000 units.
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Housing Markets and Rent Ceilings Long-Run Adjustments With the rent above $16 a month, new houses and apartments are built.
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Housing Markets and Rent Ceilings Supply curve shifts rightward. P and Q revert back to pre-earthquake levels.
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Housing Markets and Rent Ceilings A Regulated Housing Market A price ceiling is a regulation that makes it illegal to charge a price higher than a specified level. When a price ceiling is applied to a housing market it is called a rent ceiling .
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Housing Markets and Rent Ceilings The equilibrium rent is $20 a month. Rent ceiling: $16 a month. The equilibrium rent is in the illegal region.
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Housing Markets and Rent Ceilings Housing shortage.
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Housing Markets and Rent Ceilings With shortage: people are willing to pay $24 a month. Legal price cannot eliminate shortage. Read: Search activity. Black markets.
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Housing Markets and Rent Ceilings Decreases producer and consumer surplus. Deadweight loss. Rent ceilings do not benefit the poor.
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The Labor Market and Minimum Wage Labor-saving technologies. Self check-out counters at home depot and grocery stores. Likely immediate effect of technological advance: Decrease in the demand for low-skilled labor; Fall in the wage rate Decrease in the quantity of labor supplied.
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The Labor Market and Minimum Wage A decrease in the demand for low-skilled labor.
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The Labor Market and Minimum Wage Long run: People get trained to do higher-skilled jobs. Supply of low-skilled labor decreases: leftward shift of the short-run supply curve.
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The Labor Market and Minimum Wage IF the long-run supply is perfectly elastic, the equilibrium wage rate returns to its initial level, ceteris paribus.
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The Minimum Wage Price floor: Regulation that makes it illegal to trade at a price lower than a specified level. Minimum wage
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This note was uploaded on 10/10/2010 for the course ECON 2100 B taught by Professor Dr.vivekghosal during the Fall '09 term at Georgia Institute of Technology.

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Chapter 06_Markets - MARKETS IN ACTION CHAPTER 6 Housing Markets and Rent Ceilings The 1906 earthquake in San Francisco left 200,000 peoplemore

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