Ch06
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A price ceiling below the equilibrium rent for housing leads to a shortage of housing. This creates inefficiencies as search activity and black markets emerge to allocate the scarce housing. A rent ceiling results in an inefficient underproduction of housing and deadweight loss to society.
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LAW OF SUPPLY AND DEMAND
Knowing the existing theories, practices, studies and experiments on law of supply and demand
Recommended
LAW OF SUPPLY AND DEMAND
Knowing the existing theories, practices, studies and experiments on law of supply and demand
Demand and Supply Analysis (Economics) Lecture Notes
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demand and supply analysis
its all about demand and supply , what are the deteminants of demand, law of demand, supply analysis
Managment - theory of demand and supply
- meaning of demand and supply
- determinants of demand and supply
- law of demand and supply
Economic equilibrium
economic equilibrium is a state where economic forces such as supply and demand are balanced and in the absence of external influences the (equilibrium) values of economic variables will not change.
Learn how to mathematically solve for the equilibrium price and quantity in a market when given specific supply and demand curves.
Higher prices tend to reduce demand while encouraging supply, and lower prices increase demand while discouraging supply. Economic theory suggests that, in a free market there will be a single price which brings demand and supply into balance, called equilibrium price.
6GOVERNMENT ACTIONSIN MARKETS© 2012 P.docx
6
GOVERNMENT ACTIONS
IN MARKETS
*
© 2012 Pearson Addison-Wesley
*
Notes and teaching tips: 8, 25, 46, and 62.
To view a full-screen figure during a class, click the red “expand” button.
To return to the previous slide, click the red “shrink” button.
To advance to the next slide, click anywhere on the full screen figure.
© 2012 Pearson Addison-Wesley
Even though house prices have fallen, some rents have risen.
Can governments cap rents to help renters?
Can governments make housing more affordable by raising incomes with minimum wage laws?
The government taxes almost everything we buy.
But who actually pays and who benefits when a tax is cut: buyers or sellers?
The government limit the quantities that some farmers may produce and subsidizes other farmers.
Do production limits and subsidies help to make markets efficient?
*
© 2012 Pearson Addison-Wesley
A price ceiling or price cap 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.
If the rent ceiling is set above the equilibrium rent, it has no effect. The market works as if there were no ceiling.
But if the rent ceiling is set below the equilibrium rent, it has powerful effects.
A Housing Market with a Rent Ceiling
*
© 2012 Pearson Addison-Wesley
Housing Shortage
Figure 6.1 shows the effects of a rent ceiling that is set below the equilibrium rent.
The equilibrium rent is $1,000 a month.
A rent ceiling is set at $800 a month.
So the equilibrium rent is in the illegal region.
A Housing Market with a Rent Ceiling
*
© 2012 Pearson Addison-Wesley
*
© 2012 Pearson Addison-Wesley
At the rent ceiling, the quantity of housing demanded exceeds the quantity supplied.
There is a shortage of housing.
A Housing Market with a Rent Ceiling
*
Explain that because landlords can’t be forced to supply a greater quantity than they wish, the quantity of housing supplied at the rent ceiling is less than the quantity that would be supplied in an unregulated market.
© 2012 Pearson Addison-Wesley
Because the legal price cannot eliminate the shortage, other mechanisms operate: Increased search
activity A black market
With the shortage, someone is willing to pay up to $1,200 a month.
A Housing Market with a Rent Ceiling
*
© 2012 Pearson Addison-Wesley
Increased Search Activity
The time spent looking for someone with whom to do business is called search activity.
When a price is regulated and there is a shortage, search activity increases.
Search activity is costly and the opportunity cost of housing equals its rent (regulated) plus the opportunity cost of the search activity (unregulated).
Because the quantity of housing is less than the quantity in an unregulated market, the opportunity cost of housing exceeds the unregulated rent.
A Housing Market with a Rent Ceiling
*
© 2012 Pearson Addison-Wesley
A Black Market
A black market is an illegal mark.
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Demand and Supply Analysis (Economics) Lecture Notes
FellowBuddy.com is an innovative platform that brings students together to share notes, exam papers, study guides, project reports and presentation for upcoming exams.
We connect Students who have an understanding of course material with Students who need help.
Benefits:-
# Students can catch up on notes they missed because of an absence.
# Underachievers can find peer developed notes that break down lecture and study material in a way that they can understand
# Students can earn better grades, save time and study effectively
Our Vision & Mission – Simplifying Students Life
Our Belief – “The great breakthrough in your life comes when you realize it, that you can learn anything you need to learn; to accomplish any goal that you have set for yourself. This means there are no limits on what you can be, have or do.”
Like Us - https://www.facebook.com/FellowBuddycom
demand and supply analysis
its all about demand and supply , what are the deteminants of demand, law of demand, supply analysis
Managment - theory of demand and supply
- meaning of demand and supply
- determinants of demand and supply
- law of demand and supply
Economic equilibrium
economic equilibrium is a state where economic forces such as supply and demand are balanced and in the absence of external influences the (equilibrium) values of economic variables will not change.
Learn how to mathematically solve for the equilibrium price and quantity in a market when given specific supply and demand curves.
Higher prices tend to reduce demand while encouraging supply, and lower prices increase demand while discouraging supply. Economic theory suggests that, in a free market there will be a single price which brings demand and supply into balance, called equilibrium price.
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Demand and Supply Analysis (Economics) Lecture Notes
Demand and Supply Analysis (Economics) Lecture Notes
Similar to Ch06
6GOVERNMENT ACTIONSIN MARKETS© 2012 P.docx
6
GOVERNMENT ACTIONS
IN MARKETS
*
© 2012 Pearson Addison-Wesley
*
Notes and teaching tips: 8, 25, 46, and 62.
To view a full-screen figure during a class, click the red “expand” button.
To return to the previous slide, click the red “shrink” button.
To advance to the next slide, click anywhere on the full screen figure.
© 2012 Pearson Addison-Wesley
Even though house prices have fallen, some rents have risen.
Can governments cap rents to help renters?
Can governments make housing more affordable by raising incomes with minimum wage laws?
The government taxes almost everything we buy.
But who actually pays and who benefits when a tax is cut: buyers or sellers?
The government limit the quantities that some farmers may produce and subsidizes other farmers.
Do production limits and subsidies help to make markets efficient?
*
© 2012 Pearson Addison-Wesley
A price ceiling or price cap 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.
If the rent ceiling is set above the equilibrium rent, it has no effect. The market works as if there were no ceiling.
But if the rent ceiling is set below the equilibrium rent, it has powerful effects.
A Housing Market with a Rent Ceiling
*
© 2012 Pearson Addison-Wesley
Housing Shortage
Figure 6.1 shows the effects of a rent ceiling that is set below the equilibrium rent.
The equilibrium rent is $1,000 a month.
A rent ceiling is set at $800 a month.
So the equilibrium rent is in the illegal region.
A Housing Market with a Rent Ceiling
*
© 2012 Pearson Addison-Wesley
*
© 2012 Pearson Addison-Wesley
At the rent ceiling, the quantity of housing demanded exceeds the quantity supplied.
There is a shortage of housing.
A Housing Market with a Rent Ceiling
*
Explain that because landlords can’t be forced to supply a greater quantity than they wish, the quantity of housing supplied at the rent ceiling is less than the quantity that would be supplied in an unregulated market.
© 2012 Pearson Addison-Wesley
Because the legal price cannot eliminate the shortage, other mechanisms operate: Increased search
activity A black market
With the shortage, someone is willing to pay up to $1,200 a month.
A Housing Market with a Rent Ceiling
*
© 2012 Pearson Addison-Wesley
Increased Search Activity
The time spent looking for someone with whom to do business is called search activity.
When a price is regulated and there is a shortage, search activity increases.
Search activity is costly and the opportunity cost of housing equals its rent (regulated) plus the opportunity cost of the search activity (unregulated).
Because the quantity of housing is less than the quantity in an unregulated market, the opportunity cost of housing exceeds the unregulated rent.
A Housing Market with a Rent Ceiling
*
© 2012 Pearson Addison-Wesley
A Black Market
A black market is an illegal mark.
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Information Systems for Decision-MakingAssignment 1 The CEO’s.docx
Information Systems for Decision-Making
Assignment 1: The CEO’s Challenge
Due Week 3 and worth 150 points
You’ve just left an all-hands meeting at your company*. The CEO was very upset at the rise of shadow IT
projects – a major indicator that the company’s internal information system has failed to meet its needs.
Because the current information system is inadequate, inefficient, and outdated, the CEO is inviting
everyone in the organization to propose a new operational, decision support, or enterprise information
system to replace it. The executives have allocated $5 million to fund the most promising idea.
This is your chance to make a difference in the company (not to mention your own career). Write your
proposal as a memo that the entire C-suite will review. Include at least these points, in your own words, to
be persuasive:
1. Identify the main functions of your proposed information system and why they are important to the
business.
2. Describe what types of data your information system will hold and how data quality will be
ensured.
3. Explain how the old information system handles the functions you mentioned, the problems that
occur, and why your information system will handle things better.
4. Offer evidence of feasibility: Show that similar information systems have been built successfully
and that they save more money than they cost.
The executives are busy, so keep your memo to 1-4 pages and avoid any extraneous content.
*You may use a current or former employer, but do not disclose anything confidential. Or, you can pick
another organization if you are familiar with their internal (not customer-facing) information systems. You
can disguise the organization and populate it with famous names. Made-up companies are problematic
because of the amount of detail and realism they require.
Supply and Demand
How are scarce resources and products allocated within an economy?
· Who or what determines at what price consumers will be willing and able to pay for a product?
· Who or what determines at what price producers and suppliers will be willing and able to supply a product?
Markets. Markets bring together the consumers and producers and suppliers of goods and services, and it is in markets where the exchange process occurs. For brevity sake, producers will be used to represent suppliers too.
· Because the exchange process involves a market where consumers and producers come together to make the exchange, there is ultimately an agreed-upon price and quantity between the two parties.
· In order to more fully understand how this exchange process takes place and how the consumer and producer determine price and quantity, we are going to discuss specifically first the DEMAND process, and then the SUPPLY process.
Quantity demanded is a function of, or depends upon, price. There are certain variables which affect or change demand from one level to a lower or higher level. Price of related goods, population, preferences, expectations, taxes.
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Information Systems for Decision-MakingAssignment 1 The CEO’s.docx
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