eco1_lecture_6 - Economic Efficiency, Government Price...

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Unformatted text preview: Economic Efficiency, Government Price Setting, and Taxes Black markets are those in which goods and services are bought and sold at prices that violate government price regulations Economic Efficiency, Government Price Setting, and Taxes Recall the example of rental markets… Capping rents at $1000 created a transfer of surplus from landlords to tenants, and generated a shortage What’s the Economic Effect of a “Black Market” for Apartments? 4 - 1 What’s the economic effect of a black market for apartments? What’s the economic effect of a black market for apartments? Rent-controlled What’s the economic effect of a black market for apartments? Rent-controlled Black market What’s the economic effect of a black market for apartments? Rent-controlled Black market Deadweight loss has remained the same! Economic Efficiency, Government Price Setting, and Taxes When the government intervenes in the market to impose price floors or ceilings the market is no longer going to clear at a competitive equilibrium 1) Some people are going to win 2) Some people are going to lose 3) Economic efficiency overall will decline Economic Efficiency, Government Price Setting, and Taxes Analysis of market interventions can be positive or normative Economic Efficiency, Government Price Setting, and Taxes Analysis of market interventions can be positive or normative E.g. Whether rent controls are desirable or undesirable is a normative question. Economic Efficiency, Government Price Setting, and Taxes Analysis of market interventions can be positive or normative E.g. Whether rent controls are desirable or undesirable is a normative question....
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This note was uploaded on 04/09/2008 for the course ECON 001 taught by Professor Caseyquinn during the Spring '08 term at Lehigh University .

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eco1_lecture_6 - Economic Efficiency, Government Price...

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