11/28-12/2 EWOT

If I can convey that I value a good more than any of my fellow college students, I have a better chance of getting it then they. The only exception is if we were looking for apartments which are limited  by a price ceiling rendering value of a good useless

11/30

Economics of Price Controls: Price Ceilings and Rent Controls

• Rent: Two meanings
• payment for use of a unit
• something that is accrued to you that was not the result of your abilities; income not earned(economic meaning)
•  ex: landlord receiving a rent of $200 in addition to his normal  prices
• should this kind of rent be taxed
• Equilibrium [important]
• Market
• example alpha: P= $1000 Q= 12,000 (set as 1 Q)
• Controlled
• change from market equilibrium
• example alpha (cont.): P= $800 Q1= 14,000 Q2= 10,000 (Binding)
• Q1 is now more than 1 Q this means: this equilibrium is NOT MARKET CLEARING
• Price Ceiling [important]
• Binding: when it is set below the level that would have brought about market clearing
• Does lowering the price of a unit means it has become more scarce? [important]
• It depends on reason for lowering the price
• price ceiling change for a controlled equilibrium = no
• no explanation available = yes
• Consequences of Rent Control
• Reduced availability and harder to get
• many people, few apartments
• Lower Quality
• have to tolerate it because others are willing to have your room
• Other $ will be paid
• Black Markets will emerge
• Misallocations
• side deals left on the table; this time people who value the unit the most won't get it
• Other Markets are impacted
• increased prices in the city causes shortage of consumers who will look to live outside of the city which will raise their prices
• look at example alpha, Q1 to Q2 there is a shortage of 4,000 apartment renters
• Fairness
• what about the poor
• Discrimination
• the costs of doing so are not felt; many people will come to rent
• race, looks, size, gender, etc.
• Monitoring/Enforce Costs: 3
• long run supply curve will shift in and become flatter
• monitoring itself is destructive
• no production of goods and services that people want; 
• taxes to fund them which is costly
• Price ceilings are destructive and too constraining 
• Recitation
• public good- no one is excluded from sharing the benefits
• free rider- person who benefits from a public good without contributing to it 

11/28-12/2 reading

The economic problem which our society faces is how to best allocate the scarce resources that we have. It's said that this problem could be solved through an economic organization just that this kind of facilitation is not a sure-fire guarantee. The major obstruction is how to decide who would do the planning, who to be the planner. In this sense, it's difficult to construct an efficient economic organization as no one retains tacit knowledge. So, it comes down to whether the planning should be centralized or divided among multiple members. It is more efficient to pick the latter which would then shift the choice from who will the planner be to who will the qualified members be. The more people chosen, the more knowledge is obtained as well as a variety of skills. Through the joint effort of the members of the economic organization, it can be ascertained how to adapt to circumstances dealing with both time and location. Communicating information is the essential key and we have already begun to figure out how to do so through the price system and to an extent the feedback loop. These institutions relay information through prices and create a division of labour which help facilitate efficiency. Through improving on these institutions can we make more efficient our economic system

11/28

• EQ (equilibrium)
• Stylized economy with an equal number of sellers and buyers(not necessarily distinct)
• "No money on the table" which = efficient market with equal amount of buyers and sellers
• Unless you pick the right consumer, you leave valuable side deals and money on the table
• X Graph: Sellers SW to NE, Buyers NW to SE. Equilibrium price Centered
• Side Deals
• Can create surpluses
• Example: person 4 values guitar $15 while person 2 values guitar $25; person 4sells guitar to person 2 which results in $10 surplus (25-15)
• Final Price to make a good
• Salary to the worker
• Cost of making the product using the necessary inputs
• Opportunity cost of making a profit off another good
• How can you determine the Central Price?
• Consistent problem with equilibrium
• Set it too high: side deals left on the table and low quantity sold/low profit
• Set it too low: side deals left on the table and low prices/low profit
• Ration by price and the buyers who value the good the most will get it
• Sellers only need to know the price of the good relative to the amount they'll sell
• Buyers only need to know the price of the good relative to the value they place on the good
• Decentralizing decision making as best as you can is the best way to survive in this complex society
• partial solution is to experiment with different policies not infringed by government
• Rent Control and Price Ceiling
• price ceiling: landlords can't raise the price and renters can't bid higher prices

11/18

• Responses to increased demand
• accept less customers
• rationalize more narrowly
• Advantage of the market and the price system
• don't need police to ensure products aren't stolen/wasted
• we are the product police
• prices compel us to act in our self-interest
• Price System
•  forces us to make a Cost-Benefit Ratio
• we do this naturally without the enforcement of police or a czar
• force us to realize how much others value a product like water
• without this, no way/no signal to tell what people want
• under this, giving supply to people who don't want it opposed to wasting it is unethical and stupid because there will be someone who will value it more and will pay for it
• provides means to obtaining  a product even in shortages
• Black Market sales
• results in zero sum transactions
• legalization of one of these activities, ex: kidney sale, raises unethical incentives
• What determines who gets what
• usually the higher valuer
• exception: health care
• is it possible to make it independent of income
• if it is possible should it be desirable
• if it's not possible why the continued debate
• Meddling with the price system as a means to a solution makes things worse
• Money changes the nature of transactions
• solves the double coincidence of wants problem
• universally accepted currency
• divisible 

11/14

• Supply Curve
• Supply Curve= Marginal Opportunity Costs
• Costs more to make more
• Points represent the cost of producing the unit
• Curve moves up because of diminishing returns
• As Price of good goes up, willing to produce more
• 4 Main Points
• Marginal Cost= each point on the curve
• Total Cost= MC #1 + MC #2 
• Total Revenues=  P x Q
• Producer Surplus (Profits?)
• "Law" of Supply- wages go up and so will production
• false and disproven
• Behavior toward a good changes
• price
• moves along the supply curve
• it's said the quantity supplied changed
• any other factor 
• shifts curve
• ex: any change in input costs
• Expectations matter more for producers
• affect supply by shifting the curve
• prices expected to rise, buy it today
• Technology
• ex: machines, worker skill improvement etc.
• causes movement along supply curve
• Price Elasticity of Supply
• % change in quantity supplied / % change price of this good
• two results
• Relatively Elastic >1
• Relatively Inelastic <1
• Price System is the method for rationing goods

11/7-11/11 reading

The Leisure class has and still is linked to ownership which can be referred to as property rights. Therefore, if this class would have any hierarchy or ranking system, it would be whoever has the most goods is among the leisure elite.  Reputation is defined by what you own, how much, and its quality. Leisure class is also in some ways made by society. I say this meaning that whatever kind of occupation society holds in high honor is usually the highest paid. This is different through history as priests and barbarians used to be dominant in this sense but now are replaced by doctors and lawyers. I would say that in short the leisure class is the class of the privileged or the wealthy, anyone who has an abundance of goods could be part of this class.