Lecture_Notes_4 - HOW GOVERNMENTS INFLUENCE THE ECONOMY...

Info iconThis preview shows pages 1–8. Sign up to view the full content.

View Full Document Right Arrow Icon
HOW GOVERNMENTS INFLUENCE THE ECONOMY Government Influences on Markets CHAPTER 4
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
4.1 PRICE CEILINGS A Price ceiling or price cap is a government regulation that places an upper limit on the price at which a particular good, service, may be traded. An example is a price ceiling on housing rents (rent ceiling). Trading above the price ceiling is illegal .
Background image of page 2
4.1 PRICE CEILINGS Figure 4.1 shows a housing market. 1. At the market equilibrium If a rent ceiling is set above $550 a month, nothing will change. 2. The equilibrium rent is $550 a month and 3. The equilibrium quantity is 4,000 units of housing.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 4
A rent ceiling is imposed at $400 a month, which is below the market equilibrium rent. 1. The quantity of housing supplied decreases to 3,000 units. 2. The quantity of housing demanded increases to 6,000 units. 3. A shortage of 3,000 units arises. 4.1 PRICE CEILINGS Figure 4.2 shows how a rent ceiling creates a shortage.
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 6
4.1 PRICE CEILINGS: INEFFICIENCY When a rent ceiling creates a housing shortage,
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 8
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 06/21/2011 for the course ECON 201 taught by Professor Staff during the Spring '08 term at Northern Virginia Community College.

Page1 / 20

Lecture_Notes_4 - HOW GOVERNMENTS INFLUENCE THE ECONOMY...

This preview shows document pages 1 - 8. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online