Disequilibrium Economics
Instructions
***Please Answer each of the following questions with a graph and an analysis, starting with the initial equilibrium and then showing how the event generates a price ceiling or price floor. Make sure to include the winners in losers in your graph and your analysis. This should look similar to the graphs and analysis that were presented in the Disequilibrium powerpoint.
***Again, make sure to answer each question with its own separate graph that includes supply and demand with its equilibrium price and quantity (labeled as P1 and Q1) and then draw the price ceiling or floor that generates the shortage or surplus and the winners and losers.
Questions:
1. Can you explain the practice of scalping tickets for major sporting events in terms of market shortages? How else might tickets be distributed?
2. If rent controls are so counterproductive, why do cities impose them? How else might the housing problems of poor people be solved?
3. Who is harmed by rent controls? Who is helped?
4. What would happen in the apple market if the government set a minimum price of $2.00 per apple? What might motivate such a policy?
5. Is there a shortage of on-campus parking at your school? How might the shortage be resolved?
Disequilibrium Economics
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Disequilibrium Economics
Questions:
1. Can you explain the practice of scalping tickets for major sporting events in terms of market shortages? How else might tickets be distributed?
Scalping is the practice of reselling tickets at higher prices when there is an artificial creation of a market shortage. The scalpers purchase tickets at fair market prices before the events take place and then resell at higher prices when they exploit the market shortage they created.
The large purchase of tickets before the event is represented by S0, and the supply then shifts leftwards to S1 at higher pricesPp1 and quantity Q1 where Q1 < Q0.
2. If rent controls are so counterproductive, why do cities impose them? How else might the housing problems of poor people be solved?
Cities such as New York have rent controls that protect and cushion the poor from high rent and exploitation by landlords, Rent controls are mostly inexpensive cities, and rent control also influences the supply of rental housing. Rent control is a form of rent stabilization that regulates rennet against sharp increases.
Before the price controls, the equilibrium rent and quantity are determined by the demand and supply. When there is rent control, there is inefficiency. Cs represents consumer surplus, Ps represents producer surplus, and Dw represents a deadweight loss in the graph. When there is rent control, the consumer surplus increases, the producer surplus decreases
3. Who is harmed by rent controls? Who is helped?
Rent controls disincentive the landlords to increase the supply of new houses because there is a low return on i...
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