Price Controls Flashcards
A example of a price ceiling is
Rent controls
Price ceiling
Is a legally established maximum price for a good or service.
A price ceiling set above the equilibrium price has
No effect
A price ceiling set below the equilibrium price causes a
Bonding constraint on price
A binding price ceiling causes a
Shortage
Search activity
Is the time spent looking for someone with whom to do business with
What causes search activity ?
Shortage
Search activity is a high opportunity cost because?
Seller can spend time doing something more gainful and enjoyable.
When price ceiling and search activity happens; sellers sell to?
Friends, family members or people they may like. Making it a black market.
Black market is
A illegal market that operates alongside a government regulated market.
Price floor
Is a legally established minimum price for a good or service .
Example of a price floor is a
Minimum wage
If a price floor is below the unregulated market equilibrium price, it has
No effect
A price floor set above a unregulated market price, has a
Binding constraint.
A binding price floor causes a
Surplus
