price ceiling
Refer to the graph. If a city imposes a rent ceiling of $1,000, then compared with its value in competitive equilibrium, producer surplus will be reduced by
$975 MILLION PS=0.5*(1500-1000)*(2000000-1900000)+(1500-1000)*1900000=975000000 area of E and C^
Consider the market for eggs illustrated in the figure to the right. Suppose the market is perfectly competitive and initially in equilibrium at a price of 5 cents and a quantity of 50 (thousand).
If the price were 7 cents instead of 5 cents, then consumer surplus would decrease by areas B and E In turn, producer surplus would increase by area B and decrease by area F Consequently, at a price of 7 cents, deadweight loss would equal areas E and F
Use the information in the following table (and in the graph) on the market for apartments in Bay City to answer the following questions.
In the absence of rent control, what is the equilibrium rent and the equilibrium quantity of apartments rented? Equilibrium rent is $600 and the equilibrium quantity is 250 thousand apartments. In equilibrium, will there be any renters who are unable to find an apartment to rent or any landlords who are unable to find a renter for an apartment? NO Suppose the government sets a ceiling on rents of $400 per month. What is the quantity of apartments demanded, and what is the quantity of apartments supplied? With the price ceiling, the quantity demanded is 300 thousand apartments and the quantity supplied is 200 thousand apartments. Assume that the quantity of apartments supplied is the same as you determined above. But now assume that landlords ignore the law and rent this quantity of apartments for the highest rent they can get. Briefly explain what this rent will be. If landlords supply only 200 thousand apartments and ignore the price ceiling, then they can charge rent of $800.
Consider the market for electricity illustrated in the figure to the right. Suppose the market is perfectly competitive and initially in equilibrium at a price of p2 and a quantity of Q2.
Now suppose the government applies a price ceiling of p1. Compared with the market-clearing equilibrium, consumer surplus would increase by area C and decrease by area E In turn, producer surplus would decrease by areas C and F Consequently, with the price ceiling, deadweight loss would equal areas E and F
Use the information on the kumquat market in the table to answer the questions. (Quantities are given in millions of crates per year.)
The equilibrium price is $15 and the equilibrium quantity is 120 million crates. Suppose the federal government imposes a price floor of $25 per crate and purchases any surplus kumquats from producers. Now how much revenue will kumquat producers receive? Kumquat producers will receive $5.0 billion in revenue. (200x25)=$5 billion
Suppose the figure represents a local cattle market. What would be the effect on this market of the local government regulating a price ceiling of $0.60 per pound? The price ceiling is below the market equilibrium price. The market would have a shortage of 60 thousand pounds.
The price ceiling is below the market equilibrium price. The market would have a shortage of 60 thousand pounds. (90-30=60)
Suppose the government sets a ceiling on rents of $400 per month. What is the quantity of apartments demanded, and what is the quantity of apartments supplied?
With the price ceiling, the quantity demanded is 300300 thousand apartments and the quantity supplied is 200 thousand apartments. Assume that all landlords abide by the law. Compare the economic surplus in this market when there is no price ceiling to when there is a price ceiling. With the rent controls, the change in economic surplus is deadweight loss equal to the area under the demand curve and above the supply curve for units between the quantity with the rent controls and market equilibrium quantity. Furthermore, economic surplus represented by the area between the equilibrium price and the price ceiling for apartments provided with the price ceiling is transferred from producers to consumers. Assume that the quantity of apartments supplied is the same as you determined above. But now assume that landlords ignore the law and rent this quantity of apartments for the highest rent they can get. Briefly explain what this rent will be. If landlords supply only 200 thousand apartments and ignore the price ceiling, then they can charge rent of $800
The diagram to the right shows a market in which a price floor of $4.00 per unit has been imposed.
With the price floor, the consumer surplus is $5,000 producer surplus is $35000 deadweight loss is $22500 and surplus transferred from consumers to producers is $15000
The diagram to the right shows a market in which a price floor has been imposed. Identify the following
a. The deadweight loss is $30000 b. The transfer of consumer surplus to producers is $30000 c. Producer surplus with this price floor is $75000 d. Consumer surplus with this price floor is $15000
If San Francisco were to repeal its rent control law, the prices for short rentals in the city listed on Airbnb and other peer-to-peer sites would likely
fall because more housing units would become available as the average rent increased.
Refer to the graph. After rent control is imposed, area A represents
the producer surplus transferred from landlords to renters.
