price ceiling

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0 0.25 0.5 0.75 1 1.25 1.5 1.75 2 2.25 2.5 2.75 3 0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1300 1400 1500 0 0.25 0.5 0.75 1 1.25 1.5 1.75 2 2.25 2.5 2.75 3 0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1300 1400 1500 0 0.25 0.5 0.75 1 1.25 1.5 1.75 2 2.25 2.5 2.75 3 0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1300 1400 1500 0 0.25 0.5 0.75 1 1.25 1.5 1.75 2 2.25 2.5 2.75 3 0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1300 1400 1500

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Page 1: Price ceiling

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0.75

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1.5

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0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1300 1400 15000

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Page 2: Price ceiling

Bellringer

1. Find the equilibrium price of 1 loaf of bread

Price Quantity Supplied

Quantity DemandedPrice

$ 1.00$ 1.75$ 2.25$ 3.00

3007009001500

$ 0.25$ 0.50$ 1.00$ 2.25$ 3.00

1500900600400300

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0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1300 1400 1500

2. Why might a politician argue this isn’t a fair price for

large families?

Page 3: Price ceiling

Shortage & surplus

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D

SP

Q

Page 4: Price ceiling

Price floorsPrice floors – low – low limit on how low limit on how low a price can goa price can go

Price CeilingPrice Ceiling – – limit on how limit on how high a price can high a price can gogo

Government Solutions!

Page 5: Price ceiling
Page 6: Price ceiling

Price CeilingPrice CeilingDesigned to help Designed to help

consumersconsumers

Illegal to charge Illegal to charge higher than the pricehigher than the price

Example: Rent Example: Rent ControlsControls

Problems?Problems?

QualityQuality

ShortagesShortages

Page 7: Price ceiling

Price CeilingPrice CeilingDesigned to help Designed to help

consumersconsumers

Illegal to charge higher Illegal to charge higher than the pricethan the price

Example: Rent Example: Rent ControlsControls

Problems?Problems?

QualityQuality

ShortagesShortages

Stossel ClipStossel Clip

Page 8: Price ceiling
Page 9: Price ceiling
Page 10: Price ceiling

Price FloorsPrice Floors

Designed to help firmsDesigned to help firms

Illegal to charge lower than Illegal to charge lower than the pricethe price

Example: Farmers during New Example: Farmers during New DealDeal

Problems?Problems?

EfficiencyEfficiency

SurplusesSurpluses

““subsities” – payments from subsities” – payments from government to businesgovernment to busines

Page 11: Price ceiling

Price FloorsPrice Floors

Designed to help firmsDesigned to help firms

Illegal to charge lower Illegal to charge lower than the pricethan the price

Example: Farmers Example: Farmers during New Dealduring New Deal

Problems?Problems?

EfficiencyEfficiency

SurplusesSurpluses

Stossel ClipStossel Clip