MICROECONOMICS Chapter16 Price Control 價格管制

What is PRICE CONTROL? 什麼是價格管制? 價格管制的出現，基於政府認為現時市價過高或過低，於是把價格限制起來。 Price Ceiling價格上限 A price ceiling on a good is imposed when the government sets a limit on the maximum price that sellers can charge. 價格上限可視為最高的價格，市價可以低於此，但不得高於此，最高只可以等於上限。 An effective price ceiling will create a shortage, the selling price, quantity transacted and total revenue will all drop. 通常，價格上限會訂定在均衡價格之下，因為政府認為現時的市價過高，需要管制。需求量大於供應量，市場出現供不應求。 Pe Qe Q1 Q2 SHORTAGE Decrease in TR

Let's focus on the PRICE CEILING!!!! Price Floor價格下限 A price floor on a good is imposed when the government sets a limit on the minimum price that buyers will pay. 價格下限可視為最低的價格，市價可以高於此，但不得低於此，最低只可以等於下限。 An effective price floor will create a surplus. The market price will rise and the quantity transacted will fall. 通常，價格下限會訂定在均衡價格之上，因為政府認為現時的市價過低，需要管制。需求量細於供應量，市場出現供過於求。 Pf Q1 Qe Pe SURPLUS Let's focus on the PRICE CEILING!!!!

Example 1: However, N.S. Cheung regards this analysis as problematic. Suppose the government imposes a effective price ceiling ( $400) below the market clearing price($600) per unit of concert ticket. 政府訂立演場會門票的價格上限($400)較市場清銷價($600)低。 $400 $600 3 2 4 Shortage and disequilibrium is said to exist as the market does not clear. 出現了短缺及不均衡。 However, N.S. Cheung regards this analysis as problematic. 張五常先生認為傳統分析大有錯誤。 SHORTAGE

*Full price=pecuniary price + non-pecuniary price Neither shortage nor surplus is an observable fact. To Cheung, the market always clears. Under price control, even if the pecuniary price cannot clear the market, the full price will. Equilibrium can be reached even if there is a price control. 短缺或剩餘都不是可觀察的事實。張五常先生認為市場總會清銷。即使金錢價格不能,全部價格也會使市場清銷。 For examples: 1)First come, first serve(先到先得) 2)The time value (時間價值)of all persons ( $100 in the cases) 3)Perfect information(完整信息) If the goods are to be allocated using the first- come- first served criterion, queues will be expected to form and the market will be cleared at the equilibrium waiting time spent by the waiters. *Full price=pecuniary price + non-pecuniary price 全部價格=金錢價格+非金錢價格

Full price=$400+$300 =$700 At full price, =>Qd=Qs =>NO SHORTAGE Besides paying the pecuniary price($400),people have to pay a non-pecuniary price in the form of waiting. It will be as high as 3 hours of waiting($300) because the concert ticket is worth $700 at the margin. (D=MV) 人們除了要支付金錢價格($400)外,還要付出排隊輪候的非金錢價格。非金錢價格是輪候3小時,因為在邊際上,演場會飛的價格是$700。 $400 $600 3 2 4 $700 Full price=$400+$300 =$700 At full price, =>Qd=Qs =>NO SHORTAGE Non-pecuniary price (3hours)

Example2: $1500+$500=$2000 No, since at $2000,Qd=Qs Since there are insufficient places in form 6 for all form 5 students, they need to compete in order to study in form 6. $1500 $1800 $2000 1 Suppose the government sets the maximum tuition fees at $1500. Peter is willing to queue for 5 hours to get a place in form 6. What is his full price? Is there any shortages? $1500+$500=$2000 No, since at $2000,Qd=Qs

if there are any dissipation of rent??!!! If an effective price ceiling is imposed, is there any dissipation of rent? 當實施有效的價格上限,會否出現租值消散? Recall your memories, what is dissipation of rent? Dissipation of rent is the income from a common property is non-exclusive. Non-price competition would lead to a reduction in the net value of the property. 租值消散是指公共產的收入是無主收入。競爭會減少財產的淨價值。 In the above examples, if there are any dissipation of rent??!!!

Example 1: Non-exclusive income? $400 $600 3 2 4 $700 Non-exclusive income? Under price control, the right to receive income is partly or fully taken away from the property owner. If it is non-exclusive income, it will tend to dissipate under competition such as waiting in line. 如果收入沒有指定分配給什麼人,那部份收入便會在競爭下趨向消散。 $300 In this case, price control reduce the income of the owner to $400. As the remaining $300 of income is not assigned to any party, it becomes a non-exclusive income and dissipates in the form of waiting.

Example2: $1500 $1800 $2000 1 In this case, Peter is willing to pay $2000 to get a form 6 place. But, school only can receive $1500. The reminding $500 is not assigned to any parties, it becomes an non-exclusive income. $500

Summary 1. Full price=pecuniary price + non-pecuniary price 2. Equilibrium can be reached even if there is a price control. 3. Both price ceiling and price floor tend to result in a non-exclusive income, which tends to dissipate under competition. THE END