Class summary 11/30

The economics of price controls
Price ceilings---rent controls

Initial market equilibrium of rent: Price=$1000, Quantity=12000
Controlled market "equilibrium" of rent: Price=$800, Quantity demanded=14000, quantity supplied=10000 Shortage occurs when there is a binding price ceiling
Price ceiling is binding when the price is set below free market equilibrium price, which will then create shortage.

The Economics of Price Controls, Price ceilings

BAD: Increasing high price & decreasing low price & everyone offers similar price

Outcome of price ceilings (rent control)

1.     reduced availability, harder to get

2.     lower quality

3.     Black Markets

4.     Misallocation

5.     Other Neighborhoods

6.     Fairness

7.     Discrimination

8.     Enforcement

People set a low price for others to rent houses, but the actual price goes up

Do poor people make the minimum wage? How many?

50% for a black teenager to get a job

4.4 million people out of 45 million make the minimum wage

40 % married make the minimum wage