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Price Controls

by: Kaylee Wakai

Price Controls ECON 221

Kaylee Wakai

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About this Document

These notes cover price controls and price floors and ceilings
Principles of Microeconomics
Elizabeth Watson
Class Notes
#demandcurve #supplycurve #demandshifters #supplyshifters #demandfunction #marketequilibrium #surplus #pricefloor #priceceiling, Microeconomic, Econ, Economics, price controls, price ceiling, PriceFloors
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This 2 page Class Notes was uploaded by Kaylee Wakai on Saturday October 15, 2016. The Class Notes belongs to ECON 221 at University of South Carolina taught by Elizabeth Watson in Fall 2016. Since its upload, it has received 31 views.


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Date Created: 10/15/16
PriceControls Rentcontrol:Priceceiling(legallyimposedmaximumpriceinamarket,leadstoashortage) P Marketforapartments Demand Supply $1500 S P=1500–2q & p=200+3q Findmarketequilibrium 1500–2q=200+3q +2q +2q 1300=5q $980 q=260 P=$980 Calculateconsumersurplus ½(1500-980)(260)=$67,600 $200 D Calculateproducersurplus Q ½(980-200)(260)=$101,400 260 TotalSurplus $67,600+$101,400=$169,00 Implementrentcontrol Priceceiling=$650 Qd(650=1500–2q)=450 P Qs=(650=200+3q)=150 $1500 S Consumersurplus ½(1500–1200)(150)=$22,500 $1200 (1200–650)(150)=$82,500 ($22,500+$82,500)=$105,000 $980 LostConsumerSurplus ½(260-150)(1200-980)=$12,100 $650 TotalConsumerSurplus $105,000-$12,100=$92,900 $200 ProducerSurplus D ½(650-200)(150)=$33,750 Q 150 260 450 LostProducerSurplus ½(260-150)(980-650)=$18,150 TotalProducerSurplus $33,750–18,150=$15,600 Priceceilings P P Legallyimposedmaximumprice S S PC • Resultsinshortage • lesscompetitionamongsuppliers, alotofcompetitionamongbuyers P* P* • givespowertothesuppliers PC Consumersurplus Producersurplus D D Deadweightloss Q Q Binding Non-Binding PriceFloors(PriceSupport) Legallyimposedminimumprice P P • Resultsinsurplus S S • lesscompetitionamongbuyers, alotofcompetitionamongsuppliersPf • givespowertothebuyers Consumersurplus Producersurplus Pf Deadweightloss D D Q Q Binding Non-Binding CalculatingCS,ps&dwl P CS ½(150)(19.5–12)=$562.5 $19.5 S PS ½(150)(4.2–0)=$315 DWL $12 ½(12-4.2)(250-150)=$390 $4.2 D Q 150 250


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