ECON 1051 1st Edition Lecture 12 Outline of Last Lecture I. Shifts In Supply and Demand a. Examples and GraphsII. Increase in Supply, Decrease in DemandOutline of Current Lecture I. Surplus II. Deadweight LossIII. Price Controls IV. Effect of Externalities Current LectureI. Surplus a. Produce Surplus i. The difference between lowest price a firm would accept for a good or service and what they actually receive b. Consumer Surplus i. The difference between the highest price you’d be willing to pay and whatyou actually pay II. Deadweight Loss a. Reduction in economic surplus resulting from a market not being in competitive equilibrium b. People who would have more marginal benefit than cost aren’t buying the product or people who have more marginal cost than benefit are buying the product III. Price Controls a. Price Ceiling i. Legally determined max price sellers may charge b. Price Floor These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.i. Legally determined minimum price for a product c. What happens with price controls i. Scarcity ii. Black market iii. Hoarding iv. In housing1. Landlords have monopolies d. When the government imposes price ceilings/floors: i. Some people winii. Some people lose iii. Loss of economic efficiencyIV. Effect of Externalities a. Private Cost i. Cost born by producer of a good or service b. Social Cost i. Total cost of producing a good or service V. Types of Goods a. Private Goodi. Both rival and excludable b. Public Goodi. Non-rival and non-excludable ii. Ex: National Parks c. Free Riding i. Benefiting from a good without payingii. Ex: clean air d. Quasi-Public Goodi. Excludable but not rival e. Common Resource i. Rival but not
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