ECON200 NOTES2-19-13Welfare Economics & Tax Analysis Part II:Price Controls & Quantity ControlsPrice Controls-- Price ceilings: prices above which the price cannot rise. MAXIMUM price, ex:rent control in NYC.- Price floors: price below which the price cannot fall. MINIMUM price.Quantity Controls = Government passes a law saying, a certain quantity is not allowed to rise over a certain level (import level= firm cannot import more than X amount of cards)Ex: taxi cabs- legal cab has medallion, number of medallions is fixed (11,787 in 1941)- perfectly inelastic= straight vertical line- this market will [always] clear when supply is equal to demandWELFARE ECONOMICSWelfare economics: the study of how the allocations of resources affect the economy(economic well-being).**Markets are usually a good way to organize economic activity**Willingness To Pay: the maximum amount that a consumer is willing to pay/will pay for a good. The value one places on a particular good.Consumer Surplus: hhProducer Surplus: jjTotal Surplus: hhEfficiency: hhWhat is required for efficiency?: jjHow markets can lead to efficiency: hhQualifications & Caveats:
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