Lecture7--PRICESYSTEMANDGOVERNMENT

Lecture7--PRICESYSTEMANDGOVERNMENT - Semper Economicus!...

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Semper  Economicus!
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The Price System and  Government How political intervention in  markets affects market  outcomes
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Price Controls in Market  Economies Price ceilings and floors are prices set and  controlled by governments A price ceiling sets a maximum price that  sellers can charge for a good or service Price floors require a minimum price to be  paid for a good or service
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How Rent Control Works as a  Price Ceiling If the rent ceiling is  set below the  equilibrium rent,  quantity demanded  increases and  quantity supplied  declines The result is a  shortage of  apartments Rent ($ per month) Rent ($ per month) Apartments Apartments 600 600 300 300 Supply Supply Demand Demand Q Q S Q Q D Q Q e shortage shortage
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Minimum Wages are an Example  of a Price Floor If the minimum wage  is above the  equilibrium wage the  quantity of labor  supplied increases  but the quantity 
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This note was uploaded on 01/28/2011 for the course EC 205 taught by Professor Hymen during the Fall '08 term at N.C. State.

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Lecture7--PRICESYSTEMANDGOVERNMENT - Semper Economicus!...

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