Lecture+6+September+21

Lecture+6+September+21 - Today’s Agenda • More on...

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Unformatted text preview: Today’s Agenda • More on Pareto efficiency and the surplus measures • Price ceilings and floors • Or, how rent control can cause • housing shortages • abandoned apartment buildings • racial discrimination • Black markets • New Brunswick rent control ordinance • First enacted 1973 • http://snipurl.com/s06gm • Maximum allowable rental increase for 2009: 3.9% Aplia grace period ends at midnight • If you have not paid by then, • you will be unable to see or submit homework • you will lose access to the digital version of the textbook Aplia grace period ends at midnight • If you have not paid by then, • you will be unable to see or submit homework • you will lose access to the digital version of the textbook Second efficiency requirement: Operate at “right” point on PPC • “Allocative efficiency” • Need to have the right mix of goods: MB social = MC social • P = MC for all goods is a necessary condition Q $/Q S D Second efficiency requirement: Operate at “right” point on PPC • “Allocative efficiency” • Need to have the right mix of goods: MB social = MC social • P = MC for all goods is a necessary condition Q $/Q S D • MB social = MB private = P = MC private = MC social Second efficiency requirement: Operate at “right” point on PPC • “Allocative efficiency” • Need to have the right mix of goods: MB social = MC social • P = MC for all goods is a necessary condition Q $/Q S D • MB social = MB private = P = MC private = MC social Rational behavior by consumers Second efficiency requirement: Operate at “right” point on PPC • “Allocative efficiency” • Need to have the right mix of goods: MB social = MC social • P = MC for all goods is a necessary condition Q $/Q S D • MB social = MB private = P = MC private = MC social Rational behavior by consumers Rational behavior by firms Sum of surpluses is maximized at competitive equilibrium Q $/Q S P D Consumer surplus Producer surplus Sum of surpluses is smaller at all other quantities Q $/Q S P D Consumer surplus Producer surplus Sum of surpluses is smaller at all other quantities Q $/Q S P D Consumer surplus Producer surplus Transferring a unit from a buyer at P to a non-buyer lowers surplus Obtaining a unit from a non-seller at P instead of an initial seller lowers surplus Third efficiency requirement: Distribute produced goods optimally • “Distributive efficiency” • Distribute output so no consumer can be made better off without making another worse off • Need: MB X me = MB X you • For all goods and all pairs of consumers Third efficiency requirement: Distribute produced goods optimally • “Distributive efficiency” • Distribute output so no consumer can be...
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Lecture+6+September+21 - Today’s Agenda • More on...

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