Videos on Rent Control

To supplement the chapter we just covered on price floors and price ceilings…

This video isn’t as entertaining to watch–no fancy graphics–but if any of my students will listen in on this conversation with Thomas Sowell, there’s a good chance they’ll get smarter!

True or False?

I’ll give the answers in class on Wednesday. This is a good thing to put into your notebook!

1. A government-imposed tax on a market reduces the size of the market.
2. The incidence of a tax depends on whether the tax is imposed on buyers or sellers.
3. Economic policies, like price controls, and taxes, often have effects that the people who created them did not expect them to have.
4. A price ceiling is a legal minimum on the price of a good or service.
5. If a price ceiling of RMB10 per litre is imposed on petrol, and the market equilibrium price is RMB7, the price ceiling is a binding constraint on the market.
6. If a price ceiling is below equilibrium price, the quantity supplied will exceed the quantity demanded.
7. Binding price ceilings benefit consumers because they allow consumers to buy all the goods they demand at a lower price.
8. Prices are an efficient and impersonal way to decide who gets what.
9. Because both the supply of housing and the demand for housing are more elastic in the long run, housing shortages caused by rent controls grow larger in the long run than in the short run.
10. Rent control may lead to lower rents for those who get housing, but the quality of the housing may also be worse.

Price Elasticity of Demand Practice Quiz Answers

For my students: 1) 1;  2) 2; 3) 0.5; 4) 0.17; 5) 4.95% increase; 6) 12.6% increase; 7) 2.1% increase; 8) 0.3% increase; 9) 0.67; 10) 1.81; 11) 0.31; 12) 1.47.

Videos on Elasticity

When We Get to Oligopoly…

…remind me, students, of this news item. It’s a great example of the difficulty of getting members of a cartel to stick to their agreements to limit production in order to maximize total profits of the group.

Following yesterday’s latest IEA report which showed that OPEC production had hit an all time high, this morning OPEC released its own estimate of production by OPEC member nations for September and, not surprisingly, the latest report showed that in the month OPEC was supposed to be set on “cutting” production, the 14-nation group produced a whopping 33.39 million b/d crude in Sept., up 220k b/d from August.

Europe is Richer…AND Getting Greener

This very interesting article refers to several concepts we’ve touched on in the first few weeks of class, such as:

Expanding the PPF

As a result, Europe’s forests grew by a third over the last 100 years. At the same time, cropland decreased due to technological innovations such as motorization, better drainage and irrigation systems: Relatively fewer area was needed to produce the same amount of food.

Markets vs. government as the best way to organize economic activities, and how people respond to incentives

In eastern Europe, many forests re-grew after the end of the Soviet Union. Fuchs and his colleagues explain the development with the fact that many privatized agricultural farms were less competitive on the global market. Therefore, farmers abandoned unprofitable cropland. Particularly in Romania and Poland, former cropland was taken back by nature afterward, first turning into grassland and later into forests.

Trade and both absolute and comparative advantage

To the north of formerly communist Estonia, Latvia and Lithuania, Scandinavian countries were able to re-grow most of their forests (and are continuing to do so today) to keep up with timer demand, as they substituted most other suppliers in Europe that had practically used up most of their own wood resources.

Students who think economic growth is usually bad for the environment, requiring lots of government intervention, should at least consider that the real world might be more complex than what they’ve been told.

Read the whole thing.

Great Videos about Trade and Comparative Advantage

The first one is a simple and clear explanation of comparative advantage:

And here’s another one that uses the same kind of example, just a slightly different situation and adds some new material: