lectures in microeconomics-charles w. upton price ceilings
TRANSCRIPT
![Page 1: Lectures in Microeconomics-Charles W. Upton Price Ceilings](https://reader036.vdocuments.us/reader036/viewer/2022062417/5518ac40550346c31f8b4d0e/html5/thumbnails/1.jpg)
Lectures in Microeconomics-Charles W. Upton
Price CeilingsP
Q
Po
Qo
S
DPmax
Qs1 Qd
1
![Page 2: Lectures in Microeconomics-Charles W. Upton Price Ceilings](https://reader036.vdocuments.us/reader036/viewer/2022062417/5518ac40550346c31f8b4d0e/html5/thumbnails/2.jpg)
Price Ceilings
The effect of a price ceiling
• An unregulated product sells for Po. Sales are Qo.
P
Q
Po
Qo
S
D
![Page 3: Lectures in Microeconomics-Charles W. Upton Price Ceilings](https://reader036.vdocuments.us/reader036/viewer/2022062417/5518ac40550346c31f8b4d0e/html5/thumbnails/3.jpg)
Price Ceilings
The effect of a price ceiling
• An unregulated product sells for Po. Sales are Qo.
• Suppose the government sets a maximum price Pmax
P
Q
Po
Qo
S
DPmax
![Page 4: Lectures in Microeconomics-Charles W. Upton Price Ceilings](https://reader036.vdocuments.us/reader036/viewer/2022062417/5518ac40550346c31f8b4d0e/html5/thumbnails/4.jpg)
Price Ceilings
The effect of a price ceiling
• An unregulated product sells for Po. Sales are Qo.
• Suppose the government sets a maximum price Pmax
P
Q
Po
Qo
S
DPmax
Shortage!
Qs1 Qd
1
![Page 5: Lectures in Microeconomics-Charles W. Upton Price Ceilings](https://reader036.vdocuments.us/reader036/viewer/2022062417/5518ac40550346c31f8b4d0e/html5/thumbnails/5.jpg)
Price Ceilings
The effect of a price ceiling
• An unregulated product sells for Po. Sales are Qo.
• Suppose the government sets a maximum price Pmax
P
Q
Po
Qo
S
DPmax
Shortage!
Qs1 Qd
1
There is more to the story
![Page 6: Lectures in Microeconomics-Charles W. Upton Price Ceilings](https://reader036.vdocuments.us/reader036/viewer/2022062417/5518ac40550346c31f8b4d0e/html5/thumbnails/6.jpg)
Price Ceilings
The effect of a price ceiling
• People try to evade the ceiling
P
Q
Po
Qo
S
DPmax
![Page 7: Lectures in Microeconomics-Charles W. Upton Price Ceilings](https://reader036.vdocuments.us/reader036/viewer/2022062417/5518ac40550346c31f8b4d0e/html5/thumbnails/7.jpg)
Price Ceilings
The effect of a price ceiling
• People try to evade the ceiling.
• If suppliers, they shift their supply curve up by $Evade
P
Q
Po
Qo
S
DPmax $Evade, the
cost of evading
![Page 8: Lectures in Microeconomics-Charles W. Upton Price Ceilings](https://reader036.vdocuments.us/reader036/viewer/2022062417/5518ac40550346c31f8b4d0e/html5/thumbnails/8.jpg)
Price Ceilings
The effect of a price ceiling
• People try to evade the ceiling.
• If suppliers, they shift their supply curve up by $Evade
P
Q
Po
Qo
S
DPmax
Q1
![Page 9: Lectures in Microeconomics-Charles W. Upton Price Ceilings](https://reader036.vdocuments.us/reader036/viewer/2022062417/5518ac40550346c31f8b4d0e/html5/thumbnails/9.jpg)
Price Ceilings
The effect of a price ceiling
• People try to evade the ceiling.
• If suppliers, they shift their supply curve up by $Evade
P
Q
Po
Qo
S
DPmax
Q1
Price goes up
![Page 10: Lectures in Microeconomics-Charles W. Upton Price Ceilings](https://reader036.vdocuments.us/reader036/viewer/2022062417/5518ac40550346c31f8b4d0e/html5/thumbnails/10.jpg)
Price Ceilings
The effect of a price ceiling
• People try to evade the ceiling.
• If suppliers, they shift their supply curve up by $Evade
P
Q
Po
Qo
S
DPmax
Q1
No Shortage!
![Page 11: Lectures in Microeconomics-Charles W. Upton Price Ceilings](https://reader036.vdocuments.us/reader036/viewer/2022062417/5518ac40550346c31f8b4d0e/html5/thumbnails/11.jpg)
Price Ceilings
The effect of a price ceiling
• How big is this shift?
P
Q
Po
Qo
S
DPmax
Q1
![Page 12: Lectures in Microeconomics-Charles W. Upton Price Ceilings](https://reader036.vdocuments.us/reader036/viewer/2022062417/5518ac40550346c31f8b4d0e/html5/thumbnails/12.jpg)
Price Ceilings
The effect of a price ceiling
• How big is this shift?
• If the regulations are a joke, $Evade is small.
P
Q
Po
Qo
S
DPmax
Q1
![Page 13: Lectures in Microeconomics-Charles W. Upton Price Ceilings](https://reader036.vdocuments.us/reader036/viewer/2022062417/5518ac40550346c31f8b4d0e/html5/thumbnails/13.jpg)
Price Ceilings
The effect of a price ceiling
• How big is this shift?
• If the regulations are a joke, $Evade is small.
P
Q
Po
Qo
S
DPmax
Q1
Small increase over market price.
![Page 14: Lectures in Microeconomics-Charles W. Upton Price Ceilings](https://reader036.vdocuments.us/reader036/viewer/2022062417/5518ac40550346c31f8b4d0e/html5/thumbnails/14.jpg)
Price Ceilings
The effect of a price ceiling
• How big is this shift?
• If the regulations are tough and toughly enforced, $Evade can be quite large
P
Q
Po
Qo
S
DPmax
Q1
![Page 15: Lectures in Microeconomics-Charles W. Upton Price Ceilings](https://reader036.vdocuments.us/reader036/viewer/2022062417/5518ac40550346c31f8b4d0e/html5/thumbnails/15.jpg)
Price Ceilings
The effect of a price ceiling
• How big is this shift?
• If the regulations are tough and toughly enforced, $Evade can be quite large
P
Q
Po
Qo
S
DPmax
Q1
Then the regulations have a major impact.
![Page 16: Lectures in Microeconomics-Charles W. Upton Price Ceilings](https://reader036.vdocuments.us/reader036/viewer/2022062417/5518ac40550346c31f8b4d0e/html5/thumbnails/16.jpg)
Price Ceilings
The effect of a price ceiling
• How big is this shift?
• If the regulations are tough and toughly enforced, $Evade can be quite large
P
Q
Po
Qo
S
DPmax
Q1
Moral: if you are given the job of enforcing a price
ceiling, don’t work too hard at your job.
![Page 17: Lectures in Microeconomics-Charles W. Upton Price Ceilings](https://reader036.vdocuments.us/reader036/viewer/2022062417/5518ac40550346c31f8b4d0e/html5/thumbnails/17.jpg)
Price Ceilings
End
©2004 Charles W. Upton