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arianna econ chapter 6 notes

arianna econ chapter 6 notes - for the good and sellers...

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Chapter 6 Unbinding constraint : price ceiling is set above equilibrium price Binding constraint : price ceiling is set beneath equilibrium price, leaving a shortage to be decided by long lines, selling to favorites, government imposes binding price ceiling, shortage occurs, forced to ration the product. price floor: places a legal minimum price on a product unbinding price floo r: has no effect, binding floor: equilibrium is placed below price floor, causes a surplus of product tax incidence: how the burden of tax is distributed among various people. Taxes discourage market activity. When a good is taxed, the quantity of the  good sold is smaller in the new equilibrium. Buyers and sellers share the burden of taxes. In the new equilibrium, buyers pay more 
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Unformatted text preview: for the good, and sellers receive less. elastic supply : incidence of tax falls more heavily on consumers inelastic supply : incidence of the tax falls more heavily on producers rent control: the winners are those who have had an apartment for decades, losers are the actors who need a place to live. Unregulated rents would actually drop. rent for unregulated apartments are high because they are only 1/3 of the market. Average rent would rise, but actual rents would fall freeing rents lead to 20 % increase in housing investment potential boom to city's residents,...
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