Template-type: ReDIF-Paper 1.0
Author-Name: Jeremy Bulow
Author-Email: email: jbulow@stanford.edu
Author-Workplace-Name: Graduate School of Business, Stanford University, Stanford, USA 
Author-Name: Paul Klemperer
Author-Email: paul.klemperer@economics.ox.ac.uk
Author-Workplace-Name: Nuffield College, University of Oxford, Oxford, UK
Title: Price Controls and Consumer Surplus
Abstract: The condition for when a price control increases consumer welfare in
perfect competition is tighter than often realised. When demand is linear, a
small restriction on price only increases consumer surplus if the elasticity of
demand exceeds the elasticity of supply; with log-linear or constant-elasticity,
demand consumers are always hurt by price controls. The results are best
understood - and can be related to monopoly-theory results - using the fact
that consumer surplus equals the area between the demand curve and the
industry marginal-revenue curve.
Keywords: Rationing, Allocative Efficiency, Microeconomic Theory, Marginal Revenue, 
Minimum Wage, Rent Control, Consumer Welfare
Classification-JEL: D45, D61, D6
Length: 11 pages
Creation-Date: 2009-07-01
Number: 2009-W07
File-URL: http://www.nuffield.ox.ac.uk/economics/papers/2009/w7/PCCS%2008.10.09.pdf
File-Format: application/pdf
Handle: RePEc:nuf:econwp:0907