Price controls Flashcards
Explain the affects of price ceilings and price floors Define and apply economic terminology
Governments may impose an arbitrary max price( price ceiling) or a min price (price floor) on a market.The result is that the market cannot reach equilibrium
Price controls
limits the amount sellers can charge for a good or service
Price ceiling
require that a minimum price be paid for a good or service
Price floor
Prices set and controlled by government
Price ceilings and Price Floors
These are price ceilings
Distort market signals and misallocates resources from rental units to alternative uses because of increased efficiency
Rent Controls
a regulation that makes it illegal to charge a price higher than a specified level
price ceiling–a regulated housing market
when a price is applied to a housing market it is called
If it is set above the equilibrium rent, it has no effect. The market works as if there were no ceiling.
But if the rent ceiling is set below the equilibrium rent, it has powerful effects
rent ceiling
a rent ceiling leads to an inefficient use of resources
The quality of rental housing is less than the efficient quantity
inefficiency of Rent Ceilings
Price at or above floor is legal
price below floor is illegal
Price floors
Government imposes a minimum price greater than P
This generates a surplus ( Qs> Qd)
Price floor
a price floor is a regulation that makes it illegal to trade at a price lower than a specified level
When a price floor is applied to labor markets, it is called ____
If the ____ is set below the equilibrium wage rate, it has no effect. The market works if there were no minimum wage
If the minimum wage is set above the equilibrium wage rate, it has powerful effects
minimum wage
If the minimum wage is set above the equilibrium wage rate, the quantity of labor supplied by workers exceeds the quantity demanded by employers. There is a surplus of labor.
The labor Market and the minimum wage
a minimum wage leads to an inefficient use of resources
the quantity of labor employed is less than the efficient quantity
inefficiency of a minimum wage
a minimum wage decreases the quantity of labor employed
Housing markets and ten ceilings
Governments may impose an arbitrary max price( price ceiling) or a min price (price floor) on a market.The result is that the market cannot reach equilibrium
Price controls
