Consumer Choice and Controls Microeconomics Consumer Choice and Controls Purpose: Identify reasons for and problems with price controls.

I. Goals Identify a shortage or a surplus. Explain how a price ceiling or price floor can impact quantity demanded and quantity supplied. Identify real world scenarios.

Shortage Surplus I. Price and Quantity Quantity demanded is higher than quantity supplied Excess Demand Surplus Quantity supplied is higher than quantity demanded Excess Supply Given enough time, markets will eventually reach equilibrium This phenomenon is called, the Invisible Hand;

III. Government Intervention 1) Draw a supply and demand graph using these schedules for supply and demand and indicated equilibrium price and quantity. Price Quantity Supplied Quantity Demanded $200 20,000 170,000 $400 30,000 150,000 $600 40,000 130,000 $800 50,000 110,000 $1000 60,000 90,000 $1,200 70,000 $1,400 80,000

III. Government Intervention 2) The price is set at $400. What is the quantity demanded and quantity supplied? Which is larger? Is this a shortage or a surplus? Price Quantity Supplied Quantity Demanded $200 20,000 170,000 $400 30,000 150,000 $600 40,000 130,000 $800 50,000 110,000 $1000 60,000 90,000 $1,200 70,000 $1,400 80,000

III. Government Intervention Price Ceilings Maximum price set by the government for a product. Ex. Rent Control Seinfeld Clip: http://yadayadayadaecon.com/clip/12/

III. Government Intervention 3) Draw a supply and demand graph using this supply and demand schedule. Indicate equilibrium. Price Quantity Supplied Quantity Demanded $5 150,000 400,000 $6 300,000 $7 450,000 500,000 $8 600,000 $9 750,000 700,000

III. Government Intervention 4) The price is set at $8. What is the quantity demanded and quantity supplied? Which is higher? Is this a shortage or a surplus? Price Quantity Supplied Quantity Demanded $5 150,000 400,000 $6 300,000 $7 450,000 200,000 $8 600,000 100,000 $9 750,000

II. Government Intervention Price Floors Minimum price set by the government for a product. Ex. Minimum Wage Thateconguy: https://www.youtube.com/watch?v=jlZ9ug501SE