- Количество слайдов: 10
Why would the government step in to control the prices of goods and services? Would economists think that controlling prices is good idea?
Causes • The government wants to protect groups that have a hard time dealing with price increases. • Keep prices higher or lower than what would be equilibrium.
EFFECT • • Disruption of the market Distort the allocation of resources Does not work. Can work if used for a short period of time.
PRICE CEILING: (Creates a Shortage) • A MAXIMUM price set by the government that consumers are required to pay for a good or service. • Prevents prices from getting too high, enabling consumers to buy essential goods or services they wouldn’t be able to afford at the equilibrium price • Example: Rent control
Persistent Shortage • Demand will increase as price decreases • Result – suppliers don’t want to produce more b/c they can’t set their own prices.
PRICE CEILING Price Ceiling Qs Qd
PRICE FLOOR: (Creates a Surplus) • A MINIMUM price set by the government that consumers are required to pay for a good or service. • Pushes price up, ensuring that producers receive a benefit for providing a good or service • Example: Minimum wage
Persistent surplus • Because price is above equilibrium (law of Demand) tells us that we demand less as price goes up • Result: Sell at low prices or government buys the surplus
PRICE FLOOR Price Floor Qd Qs