Economics
Chapter
4
Economic Efficiency,
Government Price
Setting, and Taxes
Prepared by:
Fernando & Yvonn Quijano
© 2009 Prentice Hall Business Publishing Economics Hubbard/O’Brien UPDATE EDITION.
Should the Government
Control Apartment Rents?
Learning Objectives
4.1 Distinguishing between the concepts of consumer surplus and producer surplus. 4.2 Understand the concept of economic efficiency. 4.3 Explain the economic effect of government imposed price ceilings and price floors.
4.4 Analyze the economic impact of taxes.
New York City has two million apartments, about one million of which are subject to rent control.
The other one million apartments have their rents determined in the market by the demand and supply for apartments. APPENDIX Use quantitative demand and supply analysis.
© 2009 Prentice Hall Business Publishing Economics Hubbard/O’Brien UPDATE EDITION.
2 of 33
Chapter 4: Economic Efficiency, Government Price Setting, and Taxes
Economic Efficiency, Government Price Setting, and Taxes
Price ceiling A legally determined maximum price that sellers may charge.
Price floor A legally determined minimum price that sellers may receive.
© 2009 Prentice Hall Business Publishing Economics Hubbard/O’Brien UPDATE EDITION
3 of 33
Chapter 4: Economic Efficiency, Government Price Setting, and Taxes
Learning Objective 4.1
Consumer Surplus and Producer Surplus
4.1
Consumer Surplus
Consumer surplus
The difference between the highest price a consumer is willing to pay and the price the consumer actually pays.
Marginal benefit
The additional benefit to a consumer from consuming one more unit of a good or service.
© 2009 Prentice Hall Business Publishing Economics Hubbard/O’Brien UPDATE EDITION
4 of 33
Chapter 4: Economic Efficiency, Government Price Setting, and Taxes
Learning Objective 4.1
Consumer Surplus and Producer Surplus
Consumer Surplus
FIGURE 4-1
Deriving the
4
Economic Efficiency,
Government Price
Setting, and Taxes
Prepared by:
Fernando & Yvonn Quijano
© 2009 Prentice Hall Business Publishing Economics Hubbard/O’Brien UPDATE EDITION.
Should the Government
Control Apartment Rents?
Learning Objectives
4.1 Distinguishing between the concepts of consumer surplus and producer surplus. 4.2 Understand the concept of economic efficiency. 4.3 Explain the economic effect of government imposed price ceilings and price floors.
4.4 Analyze the economic impact of taxes.
New York City has two million apartments, about one million of which are subject to rent control.
The other one million apartments have their rents determined in the market by the demand and supply for apartments. APPENDIX Use quantitative demand and supply analysis.
© 2009 Prentice Hall Business Publishing Economics Hubbard/O’Brien UPDATE EDITION.
2 of 33
Chapter 4: Economic Efficiency, Government Price Setting, and Taxes
Economic Efficiency, Government Price Setting, and Taxes
Price ceiling A legally determined maximum price that sellers may charge.
Price floor A legally determined minimum price that sellers may receive.
© 2009 Prentice Hall Business Publishing Economics Hubbard/O’Brien UPDATE EDITION
3 of 33
Chapter 4: Economic Efficiency, Government Price Setting, and Taxes
Learning Objective 4.1
Consumer Surplus and Producer Surplus
4.1
Consumer Surplus
Consumer surplus
The difference between the highest price a consumer is willing to pay and the price the consumer actually pays.
Marginal benefit
The additional benefit to a consumer from consuming one more unit of a good or service.
© 2009 Prentice Hall Business Publishing Economics Hubbard/O’Brien UPDATE EDITION
4 of 33
Chapter 4: Economic Efficiency, Government Price Setting, and Taxes
Learning Objective 4.1
Consumer Surplus and Producer Surplus
Consumer Surplus
FIGURE 4-1
Deriving the