2DemandandSupply.ppt

* * Figure Caption: Figure 5-1: The Market for Apartments in the Absence of Government Controls Without government intervention, the market for apartments reaches equilibrium at point E with a market rent of $1,000 per month and 2 million apartments rented. * Figure Caption: Figure 5-2: The Effects of a Price Ceiling The black horizontal line represents the government-imposed price ceiling on rents of $800 per month. This price ceiling reduces the quantity of apartments supplied to 1.8 million, point A, and increases the quantity demanded to 2.2 million, point B. This creates a persistent shortage of 400,000 units: 400,000 people who want apartments at the legal rent of $800 but cannot get them * * Figure Caption: Figure 5-3: A Price Ceiling Causes Inefficiently Low Quantity A price ceiling reduces the quantity supplied below the market equilibrium quantity, leading to a deadweight loss. The area of the shaded triangle corresponds to the amount of total surplus lost due to inefficiently low quantity transacted. * Figure Caption: Figure 5-4: Winners and Losers from Rent Control Panel (a) shows the consumer surplus and producer surplus in the equilibrium of the unregulated market for apartments—before rent control. Panel (b) shows the consumer and producer surplus in the market after a price ceiling of $800 has been imposed. As you can see, for those consumers who can still obtain apartments under rent control, consumer surplus has increased but producer surplus and total surplus have decreased. * * * Figure Caption: Figure 5-5: The Market for Butter in the Absence of Government Controls Without government intervention, the market for butter reaches equilibrium at a price of $1 per pound with 10 million pounds of butter bought and sold. * Figure Caption: Figure 5-6: The Effects of a Price Floor The dark horizontal line represents the government-imposed price floor of $1.20 per pound of butter. The quantity of butter demanded falls to 9 million pounds, and the q