Presentation is loading. Please wait.

Presentation is loading. Please wait.

KRUGMAN'S MACROECONOMICS for AP* 8 Margaret Ray and David Anderson Module Supply and Demand: Price Controls (Ceilings and Floors)

Similar presentations


Presentation on theme: "KRUGMAN'S MACROECONOMICS for AP* 8 Margaret Ray and David Anderson Module Supply and Demand: Price Controls (Ceilings and Floors)"— Presentation transcript:

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

2 What you will learn in this Module : 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 Unpopular market prices Political pressure Why Governments Control Prices

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

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

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

12 Figure 8.1 The Market for Apartments in the Absence of Government Controls Ray and Anderson: Krugmans Economics for AP, First Edition Copyright © 2011 by Worth Publishers

13 Figure 8.2 The Effects of a Price Ceiling Ray and Anderson: Krugmans Economics for AP, First Edition Copyright © 2011 by Worth Publishers

14 Figure 8.3 The Market for Butter in the Absence of Government Controls Ray and Anderson: Krugmans Economics for AP, First Edition Copyright © 2011 by Worth Publishers

15 Figure 8.4 The Effects of a Price Floor Ray and Anderson: Krugmans Economics for AP, First Edition Copyright © 2011 by Worth Publishers


Download ppt "KRUGMAN'S MACROECONOMICS for AP* 8 Margaret Ray and David Anderson Module Supply and Demand: Price Controls (Ceilings and Floors)"

Similar presentations


Ads by Google