· Rent Control Market from last lecture
o Will look like a new price
§ May be lower quality
o By the end of the price ceiling, people will be scaring off customers who do not value the good enough
o House prices should be high in NYC because it is highly productive and people make more money
o San Diego
§ Same size as Dallas, similar incomes, but Dallas has no rent control and better ability to build houses
§ It’s hard to build more houses in San Diego, helping it to increase in price
o Housing vouchers
§ Gives you money to participate in the free market for housing
§ However, it’s hard to restrict the use of those vouchers
· Price Floor
o E.g. a minimum wage
o Creates a surplus (as seen in earlier lectures)
o Equilibrium Market
§ $6 is the ideal amount you can pay a worker
§ The productivity of one worker should equal the minimum wage or more
o When a wage increase is made:
§ People work more because they can earn more money for the work
§ However, less people get jobs
§ In theory, by trying to increase wages, you have increased the number of unemployed
§ It’s also hard on the employed, for they have greater competition for the job
§ Firms will pay you, but will make it harder on you because you are more costly as a worker
§ Also, firms have more incentive to replace workers with machines because they can be cheaper
o Only 4.4 million Americans make the minimum wage
§ Very few of them are poor
· College or high school students
· People who work less than 20 hours a week
§ Is that a large enough number to justify further minimum wage? NO!
o Price floors
§ Minimum price for assets to make them look better to consumers
§ Bread
· Scarcity vs. Rarity
o Something can be rare but not scarce
o Scarcity: More people want the good than is available
o Rarity: A good that there is very few of
o Unskilled workers are not scarce or rare
o Highly skilled workers (Google programmers, rocket scientists, etc.) are scarce and rare
· Drugs
o When a drug is made illegal, the supply elasticity actually increases
§ Though you have to incur all the costs, you have to bear extra costs, and by producing more, you have more costs to add onto that because you have to hide everything
§ Leaves room for greater profit for the producers
§ New types of producers come about, for the comparative advantage changes because different skills are required for people who are good at producing drugs illegally rather than legally
§ Gives greater incentive for the strength of drug to increase AND for the delivery of the drug to occur at a greater rate
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