06Gottprice_ceilingShow

06Gottprice_ceilingShow - the market eq.price. 9 W m W e Q...

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1 Ch. 6: Price Ceilings and Price Floors Government Intervention in Markets Price Ceilings Rationing Rent Control Price Floors Minimum wage laws
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2 Exh. 2 THE FISH MARKET BEFORE AND AFTER DRAFT Who feels the greatest burden of this change?
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3 Price Ceiling A maximum price set by government below the equilibrium price.
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4 Exh. 3 SETTING PRICE CEILING Maximum price set by government Note: where is equilibrium price? A normative policy issue
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5 Government rationing Allocate a shortage of goods by rationing. First come, first served. Household size Lottery. World War II: based on family size. Examples: gasoline, sugar, margarine, tires.
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6 Price Ceiling and Housing Rent control: government-set price ceiling on rent. Arguments against : Decreases landlords’ incentives to maintain rental units. Discourages new investment. Arguments for : Provides affordable housing. Investors don’t build affordable housing.
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7 Deadweight loss: price ceiling
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8 Price Floors Minimum price set by government above
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Unformatted text preview: the market eq.price. 9 W m W e Q D Q E Q S D S Minimum Wage Law Unemployment Minimum wage Note: static analysis 10 Minimum Wage Law Government-set price floor on wages. Arguments against : Raises cost to employers; lay off workers. Arguments for : Higher wage for low wage workers. Increased productivity; better morale. Increased income, increases DD, increases employment. [ Dynamic analysis] 11 EFFECT OF NEW TECHNOLOGY What is the effect? Calculate total revenue 12 EXHIBIT 5 SETTING PRICE FLOOR What problem is created? A normative policy issue 13 EXHIBIT 6 GROWTH OF U.S. AGRICULTURAL PRODUCTIVITY THROUGHOUT U.S. HISTORY * Precise data are not available. Source: James Zelner and R.M. Lamm, Agricultures Vital Role for Us All, FoodFrom Farm to Table, 1982 Yearbook of Agriculture, Department of Agriculture, Washington, D.C., p. 3. 14 EXHIBIT 9 EFFECT OF NEW TECHNOLOGY IN FARMING...
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06Gottprice_ceilingShow - the market eq.price. 9 W m W e Q...

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