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Unformatted text preview: Chapter 6: Price Controls. • Price controls have existed for thousands of years. • Price controls were in place during the Great Depression and actually exacerbated the effects of the crisis. • Price ceiling: o This is a maximum legal price that can be charged. • Price ceilings attempted to keep inflation controlled. o IE: Tailoring. o There was a tailor that pressed a suit for someone and charged 35 cents to do it. The maximum legal price was 40 cents. • OPEC 1973: o OPEC reduced the supply of oil. o The price of gas wanted to rise, so the price of gas = p* o With the govt, they said this was not a good thing and that the price was too high. o The govt. decided to regulate the price of gas to be pmax. o The price ceiling raised the quantity demanded; the quantity supplied was decreased. o Consequently, a big shortage. • (2) o Price ceilings in the 1970’s created major shortages of oil....
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This note was uploaded on 04/24/2009 for the course ECON 2105h taught by Professor Staff during the Spring '08 term at University of Georgia Athens.
- Spring '08