krugman's macroeconomics for ap* 8 margaret ray and david anderson module supply and demand:...
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![Page 1: KRUGMAN'S MACROECONOMICS for AP* 8 Margaret Ray and David Anderson Module Supply and Demand: Price Controls (Ceilings and Floors)](https://reader036.vdocuments.us/reader036/viewer/2022062511/5518ab6a550346c31f8b4cb0/html5/thumbnails/1.jpg)
KRUGMAN'SMACROECONOMICS for AP*
8
Margaret Ray and David Anderson
ModuleSupply and Demand: Price Controls (Ceilings and Floors)
![Page 2: KRUGMAN'S MACROECONOMICS for AP* 8 Margaret Ray and David Anderson Module Supply and Demand: Price Controls (Ceilings and Floors)](https://reader036.vdocuments.us/reader036/viewer/2022062511/5518ab6a550346c31f8b4cb0/html5/thumbnails/2.jpg)
What you will learnWhat you will learn
in thisin this ModuleModule::• The meaning of price controls, one
way government intervenes in markets
• How price controls can create problems and make a market inefficient
• Why economists are often deeply skeptical of attempts to intervene in markets
• Who benefits and who loses from price controls, and why they are used despite their well-known problems
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• Unpopular market prices
• Political pressure
Why Governments Control PricesWhy Governments Control Prices
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• Legal maximum price
• Examples
• Resource prices during WWII
• Oil Prices in1970s
• California electricity
• New York City apartments
Price CeilingsPrice Ceilings
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Modeling a Price CeilingModeling a Price Ceiling
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How a Price Ceiling Causes How a Price Ceiling Causes InefficiencyInefficiency
• Inefficient Allocation to Consumers
• Wasted Resources
• Inefficiently Low Quality
• Black Markets
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So Why Are There Price So Why Are There Price Ceilings?Ceilings?
• Benefit some
• Uncertainty
• Lack of understanding
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• Legal minimum price
• Examples
• Agricultural products
• Minimum wage
• Trucking
• Air travel
Price FloorsPrice Floors
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Modeling a Price FloorModeling a Price Floor
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How a Price Floor Causes How a Price Floor Causes InefficiencyInefficiency
• Inefficiently Low Quantity
• Inefficient Allocation of Sales Among Sellers
• Wasted Resources
• Inefficiently High Quality
• Illegal Activity
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So Why Are There Price So Why Are There Price Floors?Floors?
• Benefit some
• Disregard
• Lack of understanding