Question

 

1.         Who benefits from rent ceilings? Who suffers? What are the long-term effects of rent ceilings? How can landlords and tenants cheat on rent ceilings? Do you think the rent ceilings might lead to more discrimination against certain groups?
                                                                                                                                      
2.         Describe the effects on the labor market of a minimum wage that is higher than the equilibrium wage. Who benefits from such a minimum wage? Who suffers? What are the long-term effects of the minimum wage?

3.         Have you ever worked for the minimum wage? If so, for how long? Would you favor increasing the minimum wage by a dollar? By two dollars? By five dollars? Explain your reasoning.

4.      Of what significance is the elasticity of demand for drugs in the debate about legalization of presently illegal substances?

5.
a) How could taxes be used to regulate legal drug markets?
b) Why are excise taxes on cigarettes and alcohol sometimes referred to as “sin taxes”?
c) Does the government tax them solely because they are “sins”?

Answer 1

1) The renters/tenents benefits from the price ceiling because price ceiling fixes the maximum rent the owner can charge. The owners have to suffer as they have to bear the cost due to lowering of the rent price. The price ceiling reduces the amount of housing available for rents. So taking benefit of this, landlords can then charge higher amount from tenents who are in desperate need of house. For tenents the neighbourhood can be improved by having good and less tenents around and they pay less price than they would be paying without the ceiling. To some extent it does because when the numbers of houses for rent reduces, the higher amount charged can only be availed by the rich peoples and the people belonging to the poor society suffers.

2) Having higher minimum wage rate than the equilibrium increases the supply of the labour in the society but decreases the demand of labour. This leads to the unemployment in the society as less people are employed due to the less demand. The people who have jobs benefits from the minimum wage as their salaries increased and also the employer as they have lot of options to hire. The person who are looking for the jobs suffers the most as they are not able to find the job due to less demand.

3) No I have not worked for minimum wage. I favor increament of $2 bacause in today's time inflation is high and above this amount it can affect the employment rate in the economy.

4) Demand elasticity affects the legalization of the drugs. If demand is inelastic, it will result in smaller increases in usage comparison to more elastic. An excise tax imposed on a legalized drug with an inelastic demand will result in a smaller decrease in usage and more profits to the govoernment. So more inelastic more beneficial for the government.

5) a) High tax on legal drug market will reduce some amount of drugs consumed in the economy. It will increase the cost of the drugs. It can reduce the quantity produced due to legalization by imposing tax.

b) They are sin taxes as cigarettes and alcohol are not beneficial to the society and have harmful impacts in lot of ways. In some region or religion, they are known as sins of a human.

c) No, govermnet taz because they make a large proportion of total tax collected by the government. A large proportion of population consumes cigarettes and alcohol. And imposing tax makes the government a lot of money. In some extent they are taxed due to sins but not as a whole.