Intro to Microeconomics Chapter 1 - 6

7/22/2019 Intro to Microeconomics Chapter 1 - 6

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Intro to Microeconomics 9/8/2011 8:29:00 AM

Intro to Microeconomics section E

Course outline.

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Principals of Microeconomics

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Midterms

40 Multiple choice3 short answers

Final

80 Multiple choices3 short answers.

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intro to MicroChapter #1 9/8/2011 8:29:00 AM

The cost of something is what you give up to get it.example MKMR #3 P18 ,you where planning to spend saturday working at your part time job, but afriend asks you to go skiing,what is the true cost of going skiing? ski ticket + transportation + lostwages

now suppose that you had been planning to spend the day studying at thelibrary what is the cost of styding this case?

# 3 rational people think at the margin

People make decisions by comparing costs and benefits at the margin.

Example ( hot dog stand ) Marginal benefit is 800

Marginal cost is 300$ Marginal benefit is larger then marginal cost to

minimal loss.

#4 Principal. People respond to incentives.Examples The car grades.

People are rational they make decisions based upon the fact of costs vsbenefits.The 1997 Ontario case. If you earned 1$ they would take 1$ away from yourwelfare check. How does this reform affect the incentive to work? . Theywhere accepting less money. If they where working they where loosing halfof it. Efficiency gained. The negative is that the people who cant work arent

better off. Although it increases incentives to work.

-Principal # 5 . Trade can make everyone better off . why is trade good? Itallows people to specialize in what they do best.

North Korea doesnt trade = shit economy MKMR #9 page 19

Example, your roommate did all the cooking and did you the cleaning, wouldyour chores take you more or less time then if you did it individually? YES


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Canada vs Costa rica wheat vs Bananas, some people specialize wheat as

costarica specializes in producing bannanas.

Principal # 6 Markets are usually a good way to organize economic activity.

Planned economies. A Market is a group of buyers and sellers. They neednot be in a single location.Organizes economic activity means determining .The invisible hand. Its as if there a an invisiable hand that leads householdstowards economic prosperity. The interactions of buyers and sellersdetermines prices of goods and services. Prices guide self interested households.Suppose you own a classic fender guitar, Example. Bill should get the guitarbecause its worth the most to him.

But central planning is a very tough impossible job. Communist countriesworked on the premise that central planners in the government were in thebest position to guide economic activities.

Principal # 7 Government can sometimes improve market Outcomes.The market system. Market Failure occurs when the market fails to allocateresources efficiently.

Externalities ; The impact of one persons action on a bystander eg (pollution)When the market fails ( breaks down ) government can intervene topromote efficiency and equity.

Principal # 8 A countrys standard of living depend on its ability to produce

goods and services.The countries that are the most productive are richer,

Productivity is dependent on skills, human capitals , efficiency , innovation ,capital.

Principal # 9Prices raise when they print too much money,Inflation occurs when they printed too much money.


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Principal # 10 . Society faces a short run tradeoff between inflation and

unemployment.- the Phillips curve .


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Lecture on chapter 2 9/8/2011 8:29:00 AM

Intro to Microeconomics lecture # 3

The Appendix of chapter 2.. then we will start chapter 2

Thinking like an economist... " emmas demand curve

-how to graph. ( easy shit ) Price on Y and units on X (Q)Basically when people make more money they spend more...When a variable that is not on the axis changes the curve is going to shift

When two variables move in the same direction --> variables are positivelyrelated or equivalently, the curve is upward sloping....

- If two variables move in opposite directions ( such as emma's demandcurve) variables are negatively related or, equivalently the curve isdownward sloping.Slope of a curve : A measure of how much one variable responds to changesin another variable.

Slope = Change in Y/Change in X =deltaY/DeltaX= Y2-Y1/X2-X1

example: Choose the two coordinates (14,7) nd (22,5) = -0.25

CHAPTER # 2-Thinking like an Economist.Economists play two roles:- They play the role of scientists : try to explain the world.Policy advisors: try to improve it. ( trying to improve the work )

The scientific method - Make assumptions and uses abstract models toexplain how a complex , real world operates.

Assumptions simplifies the world.... Example when studying internationaltrade , we might assume that the world consists of two countries and twogoods Its unrealistic but simplifies the problem and yields useful insightsabout the more complicated real world. The art in scientific thinking isdeciding which assumptions to make.


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Example 1 the case of a physicist measuring how long it would for an anobject to fall from the top of a building the marble and beach ball theory..marble with vacume

Economists use models to study economic issues, A model is a highlysimplified representation of a more complicated reality.

Two basic economic models..

The circular Flow DiagramThe production possibilities frontier

The first model we need to learn how to model work and how to use the

model

The circular flow diagram. Is a visual model to show how the economy is

organized and how participants in the economy interacts.Two actors. Households and Firms A household buy and consumes good

and services, own and sell factors of production.Firms produce and sell goods and services, hire and use factos of

production...one of the assumptions is that theyre are these 2 entitites,,,, this recordingis a explication of the concept Another assumption is theyre is only two

markets goods and services ( firms sell and households buy )Households are selling labor and land to firms . Firms pay the house holds

for all this

A factor of production is anything that helps the production process

The production possibilities frontier, This is a graph that shows thecombinations of output that the economy can possibly produce given theavailable factors of production and the available production technology.Example a simple economie where we have 2 goods.. computers and

wheat. One resource labour ( measured in hours). Economy has 50 000labour hours per month available for production. One computer requires 00hours labour and one ton of wheat requires 10 hours of labour.


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What is the PPF? its all the possible combinations of outputs this graph

thing easy stuff easy stuff ( will be asked to make one )

A society cannot consume more then it produces

The shape of PPF , if the opportunity cost as the economy shifts resourcesfrom one industry to the other.If the opportunity cost remains constant , the PPF is a straight line.

IF opportunity cost of a good rises as the

The opportunity cost varies on the graph,

The more you produce the higher standard of living.

Shows all combinations of two goods that an economy can possibly produce,given its resources and technology. The PPF illustrates the concepts oftradeoff and opportunity cost, eficience and inefficiency.

The EXample from the book #4 pages 40 3


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Lecture #4 9/8/2011 8:29:00 AM

last class chapter 2..-Microeconomics.. looks at how households and firms make decisions andhow they interact in specific markets

Types of questions in microeconomics aims to answer...What is the effect of minimum wages on unemployment?What is the effect of rent controls on the housing market?

Macroeconomics.. looks at the economy as a wholeEconomy-wide phenomena, including inflation, unemployment, and

economics growth..

Types of questions macroeconomics aims to answer:What can the government of the poorest countries do to promote more rapideconomics growth? What can the government do to reduce

unemployment?What are the costs and benefits of government deficits?What is the relationship between interest rates and the stock market?What is inflation and why is it so high in some countries ( printing too muchmoney)

When economists are trying to explain the word, they are scientists..Why is unemployment higher for teenagers than for older workers.( more experience )When economists are trying to change the world they are policy advisers..Positive startements are starements that attempt to describe the world as itis. - Can in principle , be confirmed or refuted by examining evidence.

Normative statements are statements about how the world should be theyare prescriptive.

Normative statements may influence values as a fact.

Positive or normative statements?Minimum-wage laws cause unemployment among the least skilled.(POSITIVe)


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The gouv should raise minimum wages because a decent society demandsthat people who work should earn enough to live on. (NORMATIVE)

Economists in ottawa...They serve as policy advisors. Finance Canada , help design tax policy,

why economists often disagree

"If all economists were laid ent to end, they would not reach a conclusion.

Two possible reasons why economists often disagree; Disagree about the validity of alternative positive theories.

Chapter 3 - Remember economics is the study of how societies produce and

distribute goods in an attempt to satisfy the wants and needs of itsmembers.

How do we satisfy our wants and needs in a global economy? - we can be economically self sufficient. we can specialize in trades and offers. Show that in general a nation benefits from trading examine what

determines the pattern of production ( that is, what countryproduces what ) and trade

Imports are goods produced abroad and sold domestically.. Exports good produced domestically and sold abroad.


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Absolute avantage... the country has an absolute advantage whenit requires a smaller amount of imputs to produce that good.

The country that has the lowest opportunity cost of producing a

good is said to have a comparative dvantage in producing thatgood.

- Whenever potential trading party have differences inopportunity costs, they can each benefit from trade.

(PRINCIPAL) a country should specialize in what it does best. Inother words if it has a comparative advantage in a good , it shouldspecialize in producing that good and trade.

EX, Canada vs Japan Our example

Two countries: Canada and Japan Two goods: computers and wheat One resource: labour, measured in hours Canada has 50,000 hours available for production, per month.

Producing one computer requires 100 hours of labour; producing one tonof wheat requires 10 hours of labour.

Japan has 30,000 hours available for production, per month.Producing one computer requires 125 hours of labour; producing one tonof wheat requires 25 hours of labour. We will look at how much of both goods each country produces and

consumesif the country chooses to be self-sufficient if it trades with the othercountry

What country has an absolute advantage in producing computers .Canada has an absolute advantage to produce wheat & computers,Japan has a comparative advantage of producing computers.

Gains from specialization and trade.


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When ( that is, at what price in terms of computers. Tons of wheatis Canada interested in trading wheat for computers.

When is japan interest in trading computers for wheat?answers.. canada will want to sell wheat as long as the price it gets is

greather then its opportunity cost of producing wheat.

EXAMPLE #4 PAGE 64

Example: Problem #4, page 64Hours Needed to Make 5 L of root Beer 1 pizzaPat 4 Kris 6 42a.Opportunity Cost of Making. 1 pizzaPat Kris2.5 L of root beer 3.33 L of root beerAbsolute advantage in making pizza: Pat (takes 2 instead of 4 hours)Comparative advantage in making pizza: Pat (lowest opportunity cost)b. Who will specialize in pizza? Pat because he has a comparative advantage

c. Lowest price: 2.5 L of root beer/pizza, otherwise Pat would not want tosellas he would get less than what it costs him to do the pizza. Highest price:3.33 L of root beer/pizza, otherwise Kris would not want to buy21as it would be cheaper


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Lecture # 5 9/8/2011 8:29:00 AM

Last class we started Chapter 3 Interdependence and gains from tradeAbsolute advantage .. a country has an absolute advantage when it requiresless of something to produce a good then another country.Comparaive advantage is when a country has the lowest opportunity cost of

producing a good is said to have a comparative advantage is producing thatgood.Principle : If a country has a comparative advantage in a good, it shouldspecialize in producing a good.Finish chapter 3. In particular , will show that countries gain from trading.Recall on Canada-japan example :

Another thing what determines a countrys standard of living? How much it

can consumeWhat is the maximum a country can consume if there is no trade? Pointson the PPFIf there is no trade the PPF is also the Consumption Possibilities Frontier(CPF) If a country produces 200 computers and 700 cars, it will be able toconsume 2000 computers and 700 cars * could not consume the bundle Bfor example)When tech advantages happen the Y axis n this case will go up

Gains from trade ( Japan )

What can japan consume if no trade? ( ITS PPF) it can only consume what itproduces

(tons)For example, it could consume the 240 computers and not consume anywheat. Or it could consume 135 computers and sell the rest (that is, 105computers) for 700 tons of wheat (105 x 6.667 = 700). Or it could sell allits computers and consume only wheat (240 x 6.666 =1600)

What can Canada consume if no trade?

If no trade, Canada can consume only what it can produce, that is, itcannot consume more than the points along its PPF (its CPF is then its PPF) What can Canada consume if it specializes in wheat and trade? In other

words, what is Canadas CPF when it trades?


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For example, could produce 5,000 tons of wheat and consume all of them.

Or, could produce 5,000 tons of wheat, consume 4000 of them and sell therestWheat (tons)

(that I, 1000) for 150 computers (1000 x 0.15 =150). Or, could produce5,000 tons of wheat and consume 3400 of them and sell the5,000rest for 240 computers (240 = (5000-3400) x 0.15). Or, if it wants toconsume only computers, it could produce 1600 tons of wheatand sell them for 240 computers (the whole production of Japan), and make

All countries benefit from tade; even those that are less competitive in everyway.-This does not mean though that no one would loose his/her job if a countryenters a free-trade agreement with another country (or that one country willnot benefit more than another one from international trade.)

Some workers can loose their jobs but they should be able to find jobs inother sectors. The issue that the society as a whole is better-off when thereis international trade.Economists generally agree that globally, international trade creates more

jobs that it destroys. Trading with another country is conceptually equivalent to shifting the PPF

to the rightit is equivalent to a technological advance.

First example..


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What is the opportunity cost

The opportunity cost for 1 car is 15 tons of wheat. Opportunity cost of 1 tonof wheat is 1/15 cars . STRAIGHT CURVE = CONSTENT OPPORTUNITY COST.if it wants to produce 10 M cars it can produce 150 M tons of wheat.20


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Answer.. (really easy )


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Chapter 4) The market forces of supply and demand.

Key objectives:See what determines the

-Demand for a good in a competitive market.-Supply of a good in a competitive market.

A market is a group of buyers and sellers of a particular good or service.Buyers determine demand. Sellers determine supply.

Competitive markets..

Characteristics of competitive markets:1. The goods being offered for sale are all the same; and2. The buyers and sellers are so numerous that no single buyer or seller caninfluence the market price (that is, they are price takers).Examples of other types of markets: Only one seller who sets the price: monopoly (e.g., cable T.V.) (Chap. 15)

Few sellers that do not compete aggressively: oligopoly (e.g., airlines)(Chap. 16)

Many sellers but slightly different products: monopolistic competition (e.g.,magazine publishers) (Chap. 17)

The demand curve

Definitions: The demand curve expresses the relationship between price and quantity

demanded The quantity demanded of any good is the amount of the goods that

buyers are willing to purchase at a given price.

Relationship between quantity demanded and price

Quantity demanded (X) price (Y) ( downward slope) ( for most goods in anexonomy, the quanitity demanded goes down as the price goes up ( law of


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demand) in other words the quantity demanded is negatively related to

price demand curve is downward sloping.

Individual demand curve

Individual demand curve: demand curve for one good by one person Example: Catherines demand schedule for ice cream (page 72 in book).Price of Ice-Cream ConeQuantity of Cones Demanded$0.00 0.50 1.00 1.50 2.00 2.50 3.0012 10 8 6 4 2 0

Market demand curve..

A demand curve is derived holding all variables constant (except price andquantity). This means that changes in any variable other than price or quantity may

shift the demand curve. More formally, any change that alters the quantity demanded at every

price will shift the demand curve

If change increases the quantity demanded for every price: increase in

demand (curve shifts to the right) If change decreases the quantity demanded for every price:


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Curve shifts up if their income increases..

Demand Curve: Different types of goods Normal vs Inferior goodsAs income increases the demand for a normal good will increase.As income increases the demand for an inferior good will decrease.Example: bus rides is typically an inferior goodSubstitutes and Complements

When a fall in the price of one good reduces the demand for another good,the two goods are called substitutes.When a fall in the price of one good increases the demand for anothergood, the two goods are called complements.

The supply curve.

Definitions: The supply curve expresses the relationship between price and quantity

supplied The quantity supplied of a good is the amount of the good that sellers are

willing and able to sell at a given price

Individual supply curve: supply curve for one good by one seller Market supply: the sum of all individual supplies for all sellers of a

particular good or service. Graphically, individual supply curves are summed to obtain the market

supply curve


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The supply curve, ( Shift in demand curve )

Finish Chap. 4Shifts in the supply curvePut the supply and demand curves together to obtain the equilibrium price

and equilibrium quantity.Examine why the intersection of the supply and demand curves is anequilibrium situation.Use the supply-demand model to predict the impact on the price andquantity sold of a good following an economic shock

Change in supplyShift in the supply curveCaused by a change in a variable other than price (e.g., change in inputprices) Change in Quantity SuppliedMovement along the supply curve.Caused by a change in the price of the product

Equilibrium refers to a situation in which the price has reached the levelwhere quantity supplied equals quantity demanded. Equilibrium Price The price that balances quantity supplied and quantitydemanded.

On a graph, it is the price at which the supply and demand curvesintersect. Equilibrium Quantity The quantity supplied and the quantity demandedatthe equilibrium price.


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On a graph it is the quantity at which the supply and demand curvesintersect.

SUPPLY

DEMAND

EQUILIBRIUM is @ 2$ as both = 7

The equilibrium of supply and demand GraphicallyIF the price is above 2.00 they will have a surplus and will be pressured tolower the price to an equilibrium price.If the price is below the equilibrium price then theyre will be pressure to

raise the price.

quilibriumLaw of supply and demand Law of supply and demand The price of any good adjusts to bring the quantity supplied and the

quantity demanded for that good into balance.If the price is too high, there will be a surplus and the price will decrease.


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If the price is too low, there will be a shortage and the price will increase.

Three Steps in Analyzing Changes in Equilibrium1. Decide whether the event shifts the supply or demand curve (or both).

2. Decidewhetherthecurve(s)shift(s)to the left or to the right.3. Usethesupply-and-demanddiagramto see how the shift affects equilibriumprice and quantity

EXAMPLE: The Market for Hybrid Cars (cont)What is the impact of an increase in the price of gaz and a technologicalinnovation that reduces the cost of producing hybrid cars?PStep 1: What curve shifts? Both the S and D curves shifts Step 2: Inwhat direction? Both curves shift.Step 3: Impact on P and Q? Q increases but effect on P isambiguous. If demand increases more thanQsupply (D2), P goes up.

But if supply increases more than demand (D2), P goes down.


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Chapter 5: elasticity and its applications.Objectives:

Learn the meaning of the elasticity of demand and the elasticity of supply

Examine what determines the elasticity of demand and the elasticity ofsupply Learn how to apply the concept of elasticity

Elasticity

Definition:Elasticity is a measure of how much buyers and sellers respond to changesin market conditions

Price Elasticity of Demand Definition:The price elasticity of demand is a measure of how much the quantitydemanded of a good responds to a change in the price of that good.

EP= Percentage change in quality demanded / Percentage change in price.

EP=

Computing the Price Elasticity of DemandExample: Suppose that if the price of an ice cream cone increases from$2.00 to $2.20, the amount you buy falls from 10 to 8 cones. What is thenyour elasticity of demand?QQD 100 D =QDE=QD()100 ( PP)PpP=(Q2 Q1)/Q1 (P2 P1)/P1


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(8 - 10)/10 (2,20 2,00)/2,00=2

The Midpoint Method: A Better Way of Computing Elasticity An annoying problem with the preceding formula is that the elasticity variesdepending on whether it is a price increase or a price decrease.For example :

From A to B, P 25%, Q 33%, elasticit = 33/25 = 1,33

From B to A, P 20%, Q 50%, elasticit = 50/20 = 2,50

The Midpoint Method: A Better Way of Computing Elasticity (cont.) Thisproblem is solved if we use the midpoint method:Ep =(Q2 Q1)/[(Q1+Q2)/2] /

(P2 P1)/[(P1+P2)/2]


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Example: the demand for websitesEp =(12-8)/(20/2) (200 250)/(450/2)

Elasticy of a linear demand curve.

Elastic vs Inelastic Demand

Elastic Demand

Quantity demanded responds strongly to changes in price.

Price elasticity of demand is greater than one.

Inelastic Demand

Quantity demanded does not respond strongly to price changes.Price elasticity of demand is less than one

What determines price elasticity ?


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Example 1: Eggs vs Butter Suppose the prices of both of these goods rise by 20%. For which goodwould you expect Qd to drop the most and why?

Eggs have no close substitutes, so consumers would probably not buymuch fewer eggs if their price rises.

So Qd for butter would probably drop the most Which means that price elasticity of butter would be higher.

Lesson: Price elasticity is higher when close substitutes are

available.

What determines price elasticity?

Example 2: Blue Jeans vs Clothing

Suppose the prices of both of these goods rise by 20%. For which good

would you expect Qd to drop the most and why?

For a narrowly defined good such as blue jeans, there are manysubstitutes (khakis, corduroy pants).

There are fewer substitutes available for broadly defined goods (nosubstitute for clothing) So Qd for blue jeans would probably drop the most Which means that price elasticity of blue jeans would be higher. Lesson: Price elasticity is higher for narrowly defined goods than

broadly defined ones.


Example 3: Insulin vs Caribbean cruises Suppose the prices of both of these goods rise by 20%. For which good

would you expect Qd to drop the most and why?To millions of diabetics, insulin is a necessity. A rise in its price wouldcause little or no decrease in demand.


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A cruise is a luxury. If the price rises, some people will forego it.

So Qd for cruises would probably drop the most Which means that price elasticity of cruises would be higher.

Lesson: Price elasticity is higher for luxuries than for necessities.


Example 4: Gazoline in the short run vs Gazoline in the long run

Suppose the prices of gazoline rises by 20%. Does Qd drop more in theshort run or the long run and why?

Theres not much people can do in the short run, other than ride the busor carpool.In the long run, people can buy smaller cars or live closer to where theywork. So Qd for gazoline would probably drop the most in the long run Which means that price elasticity of gazoline would be higherin the long run than the short run. Lesson: Price elasticity is higher in the long run than the short run

What determines the demand elasticity for a good? (Summary)

Generally, demand tends to be more elastic when it is easier for the

consumer to adjust, for example, if:a large number of close substitutes.

the market is narrowly defined (e.g., food market vs ice cream market). the good is a luxury. the longer the time period.

The variety of demand curves

Economistsclassify demand curves according to their elasticity.


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Theprice elasticity of demand is closely related to the slope of the demandcurve. Rule of thumb: The flatter the curve, the bigger the elasticity. Thesteeper the curve, the smaller the elasticity.

Thenext5slidespresentthedifferent classifications, from least to mostelastic.

As the elasticity gets larger the curve gets straighter ( horizontally )


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3Midterm OCT 20Chaptr 1- 6 ( emphasis on 2 6 )

Started chap. 5 Elasticity and its applications.

Total Revenue and the Price Elasticity of Demand

Total revenue is the amount paid by buyers and received by sellers of agood. Computed as the price of the good times the quantity sold. That is,TR = P x Q

Often interested in knowing how TR varies with changes in price. The effects of a change in price on TR depends on the the elasticity ofdemand. For example, if price increasesTR increases if demand is inelastic TR decreases if demand is elastic


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How total revenue changes when price changes : Inelastic demand.


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P = P1, TR = A + B

P= P2, TR = A+C

How total revenue changes when price changes : Elastic demand


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P=P1, TR = A + BP=P2, TR = A + CTR can go down even if P increases!


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EP= deltaQ^s/{(Q1^s+Q2^S)/2}deltaP/{(P1+P2)/2}

Computing the price elasticity of supply Example: Suppose that an increase in the price of milk from $2.85 to$3.15 per L raises the amount that farmers produce from 9000 to 11000 Lper month. What is then the elasticity of supply for milk?(11,000- 9,000)/10000 =0.2/0.1=2(3.15-2.85)/3.00Elasticity= 2

The variety of supply curves

Economistsclassify supply curves according to their price-elasticity. Theslope of the supply curve is closely related to the inverse of the price-elasticity of supply. Rule of thumb: The larger the elasticity, the flatter the curve. Thesmaller the elasticity, the steeper the curve.


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Black = InelasticRed = Perfectly elastic

Determinants of Elasticity of Supply

Ability of sellers to change the amount ofthe good they produce.Beach-front land is inelastic.Books, cars, or manufactured goods are elastic. Time period. Supply is more elastic in the long run.

An Application of Supply, Demand and Elasticity

Can good news for farming be bad news for farmers? What happens to wheat farmers and the market for wheat when university

agronomists discover a new wheat hybrid that is more productive thanexisting varieties? In particular, what happens to price, quantity and totalrevenue?

Recall from Chapter 4, the Methodology to Analyze Changes in

Equilibrium

Examine whether the supply or demand curve shifts. Determine the direction of the shift of the curve.

Use the supply-and-demand diagram to see how the market equilibriumchanges.


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D is Shaped like that because there is no substitute for wheat

Other Elasticities: Income Elasticity of Demand

Definition: Income elasticity of demand measures how much the quantitydemanded of a good responds to a change in consumers income.

Income Elasticity of DemandProperties Goods consumers regard as necessities tend to be income inelasticExamples include food, fuel, clothing, utilities, and medical services. Goods consumers regard as luxuries tend to be income elastic.


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Examples include sports cars, furs, and expensive foods.

Inferior goods have a negative income elasticity.

Other Demand Elasticities: Cross-Price Elasticity of Demand

Definition: Cross-Price elasticity of demand measures how the quantitydemanded of a good responds to a change in the price of another good.


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Exam Oct 20th

Chapter 6Supply demand and government policies.

Use the supply-demand model to examine the effects of threegovernment policies:

A ceiling on prices A floor under prices A tax on a goodPrice Ceilingvs Price Floor Price Ceiling: a legal maximum on the pricePrice Ceiling at which a good can be sold (for example, a rent controllaw).

Price Floor: a legal minimum on the price at Price Floor:which a good can be sold (for example, minimum wages).


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Case Study: Rent Control in the Short Run and Long Run

Rent controls are ceilings placed on the rents that landlords may charge

their tenants.

The goal of rent control policy is to help the poor by making housing moreaffordable.

But, does it?


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TaxationSome Basic Principles

Taxes result in a change in market equilibriumprices typically go up andquantities sold go down. Buyers and sellers share the tax burden, regardless on whom the tax is

levied. The burden/incidence of a tax falls more heavily on the side of the marketthat is less elastic.


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Icidence of a tax : difference between price paid ( received) after taxinposed and the price paid ( received ) before tax was imposed.


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Documents

Intro to Microeconomics Chapter 1 - 6