Problems with Price Ceilings:
The main problem that price ceilings cause is SHORTAGE. Less people are willing to sell but more people are willing to buy. The price cannot bounce back to equilibrium.
It is not a landlord’s moral obligation to keep prices down so they are affordable. If this is the case, why isn’t it everyone’s moral obligation to provide housing? Why is it just the landlord’s
Price ceilings are intended to serve the poor/middle class who are unable to afford housing, but they
Actually more costly that price ceilings are enacted because they cause:
-Enforcement and policing (regulation is a cost)
-Bribery
-Inequity
-low-quality housing
-facilitators (apartment brokers)
-discrimination
The minimum wage reduced the demand firms have for workers. With higher wages, firms will respond ON SAME MARGIN to fix it.
Drugs and Illegal things
Rarity vs. Scarcity
What is the difference between rarity and scarcity? If something is rare, is it scarce?
Rizzo’s engagement ring: It is the only ring of its kind (with Rizzo’s initials and his wife’s initials). It is RARE but it is not scarce.
Water: Water is not rare but it is very scarce
Therefore, rarity and scarcity are different in that rarity is absolutely little in quantity whereas scarcity is when there is NOT ENOUGH of a good (even if it is abundant).
Surplus vs. Scarcity
If there is a surplus of something, can it be scarce?
If there is a surplus of a certain good, the quantity can be scarce because it means you are making a tradeoff. Remember the definition of scarcity since the 1st week of class: things are scarce because you have must forgo one good to get another good.
ex: You will LOSE marginal benefits, like benefits. Benefits are not included in your wages so with higher wages, firms may take away your benefits.
What are better alternatives to minimum wage?
-Earned income credit
What matters most is that people are not excluded from the market.
Why do unions support minimum wages?
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