2. Should the Government Control Apartment Rents? Learning Objectives 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. Analyze the economic impact of taxes . 4.4 Understand the economic effect of government imposed price ceilings and price floors . 4.3 Understand the concept of economic efficiency . 4.2 Understand the concepts of consumer surplus and producer surplus . 4.1

7. Consumer Surplus and Producer Surplus FIGURE 4-3 Total Consumer Surplus in the Market for Chai Tea Learning Objective 4.1 Consumer Surplus

12. The Efficiency of Competitive Markets FIGURE 4-5 Marginal Benefit Equals Marginal Cost Only at Competitive Equilibrium Marginal Benefit Equals Marginal Cost in Competitive Equilibrium Learning Objective 4.2

13. The Efficiency of Competitive Markets FIGURE 4-6 Economic Surplus Equals the Sum of Consumer Surplus and Producer Surplus Economic Surplus Learning Objective 4.2 Economic surplus The sum of consumer surplus and producer surplus.

14. The Efficiency of Competitive Markets FIGURE 4-7 When a Market Is Not in Equilibrium There is a Deadweight Loss Deadweight Loss Deadweight loss The reduction in economic surplus resulting from a market not being in competitive equilibrium. Learning Objective 4.2

15. The Efficiency of Competitive Markets Economic efficiency A market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production, and in which the sum of consumer surplus and producer surplus is at a maximum. Economic Surplus and Economic Efficiency Learning Objective 4.2

16. Government Intervention in the Market: Price Floors And Price Ceilings FIGURE 4-8 The Economic Effect of a Price Floor in the Wheat Market Price Floors: Government Policy in Agricultural Markets Learning Objective 4.3

18. Government Intervention in the Market: Price Floors And Price Ceilings FIGURE 4-9 The Economic Effect of a Rent Ceiling Price Ceilings: Government Rent Control Policy in Housing Markets Don’t Let This Happen to YOU! Don’t Confuse “ Scarcity ” with a “ Shortage ” Learning Objective 4.3

19. Government Intervention in the Market: Price Floors And Price Ceilings Black Markets Black markets A market in which buying and selling take place at prices that violate government price regulations. Learning Objective 4.3

20. What’s the Economic Effect of a “Black Market” for Apartments? Learning Objective 4.3 Solved Problem 4-3

24. The Economic Impact of Taxes The Effect of Taxes on Economic Efficiency FIGURE 4-10 The Effect of a Tax on the Market for Cigarettes Learning Objective 4.4

25. The Economic Impact of Taxes Tax Incidence: Who Actually Pays a Tax? Tax incidence The actual division of the burden of a tax between buyers and sellers in a market. Learning Objective 4.4

26. The Economic Impact of Taxes Tax Incidence: Who Actually Pays a Tax? Determining Tax Incidence on a Demand and Supply Graph FIGURE 4-11 The Incidence of a Tax on Gasoline Learning Objective 4.4

27. When Do Consumers Pay All of a Sales Tax Increase? Learning Objective 4.4 Solved Problem 4-4

28. The Economic Impact of Taxes Tax Incidence: Who Actually Pays a Tax? Does It Matter Whether the Tax Is on Buyers or Sellers? FIGURE 4-12 The Incidence of a Tax on Gasoline Paid by Buyers Learning Objective 4.4

30. An Inside LOOK Is Rent Control a Lifeline or Stranglehold? The Landlords: Two Sides of a Coin

31. Black market Consumer surplus Deadweight loss Economic efficiency Economic surplus Marginal benefit Marginal cost Price ceiling Price floor Producer surplus Tax incidence K e y T e r m s