Econ 202 1st Edition Lecture 6 Outline of Current Lecture II Modules 13 and 14 III Price and Quantity Controls Current Lecture Price and Quantity Controls Price Controls Mandated minimum or maximum price Price Ceiling a maximum price benefits those on the Demand Curve Price Floor a minimum price benefits those on the Supply Curve Ceiling Examples Gas Control Rent Control Price can t go above the particular level that the price ceiling caps a binding ceiling should keep the price below These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute The gap between 7 and 15 is a shortage Natural Pressure pushes up Ceiling Inefficiencies 1 Low Quantity the price ceiling has artificially limited the quantity the actual quantity will be set by the suppliers 2 Low Quality the product ends up being lower quality a Example New York Apartment 3 Consumer Allocation the consumers do not receive the good in an efficient manner 4 Wasted Resources 5 Black Market Activity the government mandate leads people to finding ways around them whether it is illegal or not a Landlords and bibes Price Ceilings exist because sometimes they are needed Price Floor Agricultural Prices Minimum Wage Floor Inefficiencies 1 Low Quantity 2 High Quality market gets flooded with high goods because you can t keep paying for lower quality a Automobiles 3 Seller Allocation 4 Wasted Resources 5 Black Market Activity Both floors and ceilings distort the market Quantity Controls Consumers pay 8 but you only receive 3 Wedge could rent the medallion out 5 is rent
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