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Module Supply and Demand: Price Controls (Ceilings and Floors)

8. Module Supply and Demand: Price Controls (Ceilings and Floors). KRUGMAN'S MACROECONOMICS for AP*. Margaret Ray and David Anderson. What you will learn in this Module :. The meaning of price controls, one way government intervenes in markets

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Module Supply and Demand: Price Controls (Ceilings and Floors)

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  1. 8 ModuleSupply and Demand:Price Controls(Ceilings and Floors) • KRUGMAN'S • MACROECONOMICS for AP* Margaret Ray and David Anderson

  2. What you will learnin thisModule: • 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

  3. Why Governments Control Prices • Unpopular market prices • Political pressure

  4. Price Ceilings • Legal maximum price • Examples • Resource prices during WWII • Oil Prices in1970s • California electricity • New York City apartments

  5. Modeling a Price Ceiling

  6. How a Price Ceiling Causes Inefficiency • Inefficient Allocation to Consumers • Wasted Resources • Inefficiently Low Quality • Black Markets

  7. So Why Are There Price Ceilings? • Benefit some • Uncertainty • Lack of understanding

  8. Price Floors • Legal minimum price • Examples • Agricultural products • Minimum wage • Trucking • Air travel

  9. Modeling a Price Floor

  10. How a Price Floor Causes Inefficiency • Inefficiently Low Quantity • Inefficient Allocation of Sales Among Sellers • Wasted Resources • Inefficiently High Quality • Illegal Activity

  11. So Why Are There Price Floors? • Benefit some • Disregard • Lack of understanding

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