price ceiling
DESCRIPTION
TRANSCRIPT
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 15000
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
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
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
2. Why might a politician argue this isn’t a fair price for
large families?
Shortage & surplus
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
D
SP
Q
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!
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
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
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
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