ECON 2305 Lecture 7 Outline of Last Lecture I Non price determinants continued Outline of Current Lecture I Price Controls and Wage Controls II Price Ceilings and Price Floor Current Lecture 2 types of price controls Price ceiling limiting price increases Rent controls Gasoline prices Nixon wage and price controls 1970s Price Floor minimum price is established Minimum wage law Farming agriculture price support Price Ceiling Rent control classic example a New York b California c Other areas Per text approx 200 cities towns Purposes Affordable housing What are the results Transfer of Income from to No incentive to construct housing Non price discrimination Black market Grease the market Key deposit Reduce maintenance 30 hours per week down to 15 hours What gets left out What happens to property Property values Tax base Law of unintended consequences Inefficiency Family size 3 bedroom unit Minimum wage Federal recent history 5 15 5 85 6 55 7 25 40 increase States might have a higher minimum wage What s the purpose Who works for minimum wage Highschool students low skilled workers etc Texas most minimum wage jobs out of all states Lower the wages are the higher the demand for labor is Increase the minimum wage What are the results Surplus Reduced quantity demanded for labor Lay offs Reduced hours Reduced benefits Wage progression among other workers Who gets the boot if the wage is increased Least productive Less skilled Price Controls final observation Simple ideas in theory but extremely complicated exercise in practice
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