EconH200L6

EconH200L6 - The Effect of Government on Markets 1. Price...

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The Effect of Government on Markets 1. Price Ceilings Price controls (like price ceilings and floors) are among the most invasive government interventions on markets, and are usually very inefficient. The American Assoc. of Ice Cream Eaters wants a Price Ceiling , which is a maximum price that can be charged. If a price ceiling is set too high, it is not binding and has no impact. If the price ceiling is set low enough to matter, it leads to shortages and rationing . • Examples: gas lines during the 1970’s, many medicare services, campgrounds at our national parks, automobile insurance in New Jersey, rent control.
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Price Floors The National Assoc. of Ice Cream Makers wants a Price Floor , or a minimum price that can be charged. If a price floor is set too low, it is not binding and has no effect. If a price floor is set high enough to matter, there is a surplus and some sellers are rationed. • Examples:
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This note was uploaded on 07/17/2008 for the course H 200 taught by Professor Fleisher during the Fall '08 term at Ohio State.

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EconH200L6 - The Effect of Government on Markets 1. Price...

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