Recall the rent control.
Since there are now 4000 more demanders, there are gonna be other ways to ration the houses.
If the supply curve is flatter, it will cause more shortage of houses because landlords are so sensitive to the change of price that they are not incentivized to provide houses when the rent is regulated at a lower price. This will also make demanders harder to get the houses, they have to bear more real trade-offs to get the houses.
If the demand curve is flatter (demanders are sensitive to the price so they will want to buy more when the rent fee is artificially lower.) There will be more shortage of houses and worse still, people are not willing to bear a larger trade-off to get the houses.
There is a better to help the poor: give them wage subsidy.
This will not impair the market and people are free to use the money: not all of them will spend all the money in the houses, they may value other things more. So the clothes factories, for instance, may get profit and since now the house demand is really higher in a free market, it gives incentive to landlords to provide more houses with high quality.
Price floor:
What determines wage? Worker's own productivity and the market's value on his work
When there is a binding price floor, like minimum wage law, the quantity demanded (firm employment) will decrease and the quantity supplied (people who want a job) will increase, and thus a surplus is created.
Consequences, facts
(1) The law makes fewer people get the job (besides, the labor market demand is elastic, about 3, which means that a 1% increase of wage rate can result in 3% decrease in the number of workers hired) and make the existing workers harder to keep the job (because of the abundant existence of substitutes)
(2) Some workers just don't worth the new wage, it's a waste of cost.
(3) The cost has to come from somewhere. So may be the health care is gone, the vacations are gone, and the since the cost of productions are now higher, the price of the product can be higher. If you take the whole economy into consideration, a minimum wage law doesn't make any sense.
(4) The impact of minimum wage law is small.
(5) There's a better way other than the law. Give subsidy to producers. They will have freedom to hire workers, do researches or invest.
(6) Only a small portion of people live by minimum wage. So a law intended to benefit only a small amount of people isn't good.
Rarity doesn't mean scarcity.
Scarcity means that people want it more than it is available so the term is a relative notion. People put strong value on oil, which is always abundant, so now oil is scarce despite its physical abundance. Things that are rate may not be scarce because people don't value it so much.
Surplus doesn't mean abundance and free.
Surplus is a price phenomenon. You still have to bear trade-off to get the stuff though the price is wrong.When something is free, it means that you don't have to bear any trade-offs to get it.
Supply curve represents how much opportunity cost the producers bear when they produce marginal good.
When the drugs are made illegal,
(1)the supply curve will become steeper because the cost of production is now higher, including vigilance, risk, force and bribe.
(2) The composition of drug dealers will change because dealers that don't want to break the law quit and those who have a comparative advantage in drug business will step in and keep.
(3) The profit will be considerable. Since the suppliers are fewer with the same (or increasing) number of demanders, drug dealers can earn more, offsetting the increasing cost.
(4) Drug dealers may make more powerful drugs since the probability of getting caught is the same.
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