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This 1 page Class Notes was uploaded by Charles Smith on Sunday October 2, 2016. The Class Notes belongs to ECON 200 at James Madison University taught by in Fall 2016. Since its upload, it has received 3 views. For similar materials see Introduction to Macroeconomics in Economics at James Madison University.
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Date Created: 10/02/16
Day 9: Deadweight Loss- total of lost consumer and producer surplus when all mutually profitable gains from trade are not exploited. Price ceilings lead to the quantity supplied being less than the equilibrium. Market Price= Equilibrium. Deadweight Loss is made of Lost Consumer Surplus, Lost Producer Surplus, and Total Value Of Wasted Time. Price Controls distort signals and eliminate incentives leading to resource misallocation. Consumers who want a good most are prevented from signaling their preference (by offering sales a higher price.) Without the restrictions of a price ceiling, the market has the freedom to determine where the price meets the demand margin and preventing shortages (ceilings) and surpluses (floors). So producers have no incentive to supply the good to the “right” suppliers, as they all can only pay the same amount. Rent controls; regulation that prevents rent from rising to equilibrium levels. High quality raises costs and reduces seller profit. Buyers get higher quantity, but would prefer a lower price for the service of delivery and manufacturing.