Economics essay Term Paper Example | Topics and Well Written Essays - 500 words

Economics essay - Term Paper ExampleSome consumers may wish to ingest houses at higher rates than P and sellers may violate the existing lawfulness by accepting these wrongs offered. Therefore, sellers may accept scathe E because the consumers leave be willing to rent rates above P as competition arises among consumers who strive to acquire the scarce commodity. The prices will go high up to E which is illustrated in the diagram below. The beat demanded exceeds Qs at any lower price than E, and consumers effort remains intensified. The market reaches the Equilibrium only when the price reaches P. The competitory price is D. The price the suppliers will receive is P regardless of the higher price due to price ceilings. Hence, price E is used in calculating the consumers supererogatory. Producers surplus is calculated using P. In both cases, the actual quantity of houses is Qs. According to Taylor and Weerapana (194), when the government imposes price ceiling, producers will s ell less quantity at lower prices and will lose some profits. If some consumers purchase products at higher prices, producers will gain. However, other consumers will lose because the supplies will be scarce. According to Hirschey (437), dead weight loss results from competitive market equilibrium deviations. He further asserts that deadweight loss can occur to both consumers and producers and is not transferable. Instead, losings arise from imperfections in the market and government policies. Deadweight loss is known as welfare loss triangle. This is because when elongate curves of supply and demand are used, deadweight losses are portrayed as triangles.From the figure above, the effects of craft of price ceiling on both the consumer and producer surplus is shown. The sum of consumer and producer surplus in front the price ceiling was imposed is shown by the area of triangle ABC, the area BCD shows consumer surplus and the producer surplus is