Micro economic GOVERNMENT ACTIONS IN MARKETS教材课程.pptVIP

6;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?;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.;At the rent ceiling, the quantity of housing demanded exceeds the quantity supplied. There is a shortage of housing.;Because the legal price cannot eliminate the shortage, other mechanisms operate: Increased searchactivity A black market With the shortage, someone is willing to pay up to $1,200 a month.;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 Black Market A black market is an illegal market that operates alongside a legal market in which a price ceiling or other restriction has been imposed. A shortage of housing creates a black market in housing. Illegal arrangements are made between renters and landlords at rents above the rent ceiling—and generally a