【正文】 ores the cost of making ine transfers. Recognizing these costs leads to the big tradeoff between efficiency and fairness. Because of the big tradeoff, John Rawls proposed that ine should be redistributed to point at which the poorest person is as well off as possible. Is the Competitive Market Fair? 169。 2020 Pearson AddisonWesley In economics, this principle means equality of opportunity, not equality of ine. Robert Nozick suggested that fairness is based on two rules: 1. The state must create and enforce laws that establish and protect private property. 2. Private property may be transferred from one person to another only by voluntary exchange. This means that if resources are allocated efficiently, they may also be allocated fairly. Is the Competitive Market Fair? 169。 2020 Pearson AddisonWesley 6 GOVERNMENT ACTIONS IN MARKETS 169。 2020 Pearson AddisonWesley Even though house prices have fallen, some rents have risen. Can governments cap rents to help renters? Can governments make housing more affordable by raising ines with minimum wage laws? The government taxes almost everything we buy. But who actually pays and who benefits when a tax is cut: buyers or sellers? The government limit the quantities that some farmers may produce and subsidizes other farmers. Do production limits and subsidies help to make markets efficient? 169。 2020 Pearson AddisonWesley Housing Shortage Figure shows the effects of a rent ceiling that is set below the equilibrium rent. The equilibrium rent is $1,000 a month. A rent ceiling is set at $800 a month. So the equilibrium rent is in the illegal region. A Housing Market with a Rent Ceiling 169。 2020 Pearson AddisonWesley Because the legal price cannot eliminate the shortage, other mechanisms operate: ? Increased search activity ? A black market With the shortage, someone is willing to pay up to $1,200 a month. A Housing Market with a Rent Ceiling 169。 2020 Pearson AddisonWesley A Black Market A black market is an illegal market that operates alongside a legal market in which a price ceiling or other restriction has been imposed. A shortage of housing creates a black market in housing. Illegal arrangements are made between renters and landlords at rents above the rent ceiling—and generally above what the rent would have been in an unregulated market. A Housing Market with a Rent Ceiling 169。 2020 Pearson AddisonWesley A rent ceiling decreases the quantity of housing supplied to less than the efficient quantity. A deadweight loss arises. Producer surplus shrinks. Consumer surplus shrinks. There is a potential loss from increased search activity. A Housing Market with a Rent Ceiling 169。 2020 Pearson AddisonWesley A lottery gives scarce housing to the lucky. A firste, first served gives scarce housing to those who have the greatest foresight and get their names on the list first. Discrimination gives scarce housing to friends, family members, or those of the selected race or sex. None of these methods leads to a fair oute. A Housing Market with a Rent Ceiling 169。 2020 Pearson AddisonWesley Minimum Wage Brings Unemployment If the minimum wage is set above the equilibrium wage rate, the quantity of labor supplied by workers exceeds the quantity demanded by employers. There is a surplus of labor. The quantity of labor hired at the minimum wage is less than the quantity that would be hired in an unregulated labor market. Because the legal wage rate cannot eliminate the surplus, the minimum wage creates unemployment. A Labor Market with a Minimum Wage 169。 2020 Pearson AddisonWesley A Labor Market with a Minimum Wage The quantity of labor supplied exceeds the quantity demanded and unemployment is created. With only 20 million hours demanded, some workers are willing to supply the last hour demanded for $8. 169。 2020 Pearson AddisonWesley A minimum wage set above the equilibrium wage decreases the quantity of labor employed. A deadweight loss arises. The potential loss from increased job search decreases both workers’ surplus and firms’ surplus. The full loss is the sum of the red and gray areas. A Labor Market with a Minimum Wage 169。 2020 Pearson AddisonWesley Taxes Everything you earn and most things you buy are taxed. Who really pays these taxes? Ine tax and the Social Security tax are deducted from your pay, and state sales tax is added to the price of the things you buy, so isn’t it obvious that you pay these taxes? Isn’t it equally obvious that your employer pays the employer’s contribution to the Social Security tax? You’re going to discover that it isn’t obvious who pays a tax and that lawmakers don’t decide who will pay! 169。 2020 Pearson AddisonWesley Tax incidence doesn’t depend on tax law! The law might impose a tax on buyers or sellers, but the oute will be the same. To see why, we look at the tax on cigarettes in New York City. On July 1, 2020, New York City raised the tax on the sales of cigarettes from almost nothing to $ a pack. What are the effects of this tax? Taxes 169。 2020 Pearson AddisonWesley The market price paid by buyers rises to $ a pack and the quantity bought decreases. The price received by the sellers falls to $ a pack. So with the tax of $ a pack, buyers pay $ a pack more and sellers receive 50162。 2020 Pearson AddisonWesley A Tax on Buyers Again, with no tax, the equilibrium price is $ a pack. A tax on buyers of $ a pack is introduced. Demand decreases and the curve D ? tax on buyers shows the new demand curve. Taxes 169。 a pack less. The price paid by buyers rises to $ a pack. Taxes 169。 of the tax. Tax incidence is the same regardless of whether the law says sellers pay or buyers pay. Taxes 169