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Understanding Price Controls and Rationing in Economics

Learn about price ceilings, price floors, minimum wage, rationing, and black markets in economics. Understand the consequences and ethical dilemmas of rationing in healthcare. Find out why black markets develop and how they impact the economy.

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Understanding Price Controls and Rationing in Economics

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  1. Bell Ringer #11 – 10/26/10 • Explain the difference between “price ceiling” and “price floor”. • Why does the government set a “minimum wage”? • What is the current minimum wage in Illinois?

  2. What political connections can be seen to minimum wage from this map?

  3. Rationing • Rationing is when the government distributes products on the basis of policy decisions, rather than by supply/demand. • Gov’t rationed meat & butter during WWII. • College sports tickets – to ensure Ohio State students get access to affordable seats, a number of tix are rationed for them. Makes it harder for the rest of us!

  4. Rationing Medical Care? • Which is more valuable? To provide a $150,000 liver transplant for an ailing child? • Or to use that money for prenatal care that may enhance the life expectancy of fetuses being carried by 150 expectant mothers?

  5. Is rationing the only solution? • To most Americans, the either/or aspect of the baby question is morally repugnant -- surely the leader of the capitalist world can afford both? • A growing # of health experts argue that the U.S., in fact, no longer has the finances to provide unlimited medical treatment for all who need it. • Is the only solution to ration health care?

  6. 3 Consequences of Rationing • Can be unfair • Is expensive • Creates “black markets”

  7. Black Markets • A black market is the buying and selling of goods in violation of the law, typically at a higher price than has been officially established. • They develop because rationing does not satisfy consumer demand. • Ex: scalping tickets

  8. Homework Read Ch 5, Sn 3 – “Managing Prices” Answer questions 1 & 3 on page 112. Due on Wednesday

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