Consumer surplus measures the benefit to consumers of purchasing a product. Producer surplus measures the benefit to producers of selling a product. These tools used together can help us better understand how changes in a market impact efficiency and equity. Use these tools to evaluate the impact of imposing a usury law on the market for loans. Assume that the market price (APR) of loans before the usury law is 46%. How will it affect efficiency? How will it affect equity? Explain.
Consumer surplus measures the benefit to consumers of purchasing a product. Producer surplus measures the benefit to producers of selling a product. These tools used together can help us better understand how changes in a market impact efficiency and equity. Use these tools to evaluate the impact of imposing a usury law on the market for loans. Assume that the market price (APR) of loans before the usury law is 46%. How will it affect efficiency? How will it affect equity? Explain.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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