price ceiling

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