Topic 4: Policy Analysis with Supply and Demand

PRICE FLOORS
- A minimum price imposed by a government or agency, for a particular product or
service. An effective price floor needs to be higher than the equilibrium price, the price
at which supply and demand are equal.
- Additionally, sellers who charge a price lower than the imposed price floors would be
breaking the law.
MINIMUM WAGES
- is also defined as the minimum amount of remuneration that an employer is required to
pay wage earners for the work performed during a given period, which cannot be
reduced by collective agreement or an individual contract. The employers can’t go
beyond the amount of the minimum wages, this is to protect the employees or workers
from abusive people, they also deserved to get paid enough for what they have done,
the wages are depending on the work they are probably doing.
ADVANTAGES OF MINIMUM WAGES
- The low skilled workers are paid enough without looking at what they can do.
- The business can set their labor cost for the month or year, the can exactly expect their
expenditures.
DISADVANTAGES OF MINIMUM WAGES
- Even low skilled people are paid just like the skilled one, because of the minimum
wages, their salary are the same, whether they worked hard or not.
- Because the firms and business are looking forward to the labor cost, they will have a
second thought in employing low skilled people, instead they want to spend their
money wisely through hiring skilled people, so that the money they pay will go to the
right employees. This, unfortunately find those low skilled people unemployed, or the
worst case is, they can’t find job.
BLACK MARKETS WITH MINIMUM WAGES
- Whenever the government prohibits supply and demand from operating, it creates
incentives for lawbreaking.
- For example: The minimum wages of the construction worker is 400 pesos per day, but
the company can only pay 300 pesos per day and the workers or employer agreed on
that wage of 300 pesos. The worker can work for it even if it’s beyond the minimum
wage. Black market happened.
ADMINISTRATIVE COST
 - To combat or opposed the black market, governments need to employ inspectors to
check or ensure that firms pay no less than the minimum wages. The cost of these
inspectors adds to the social cost of the minimum wage.
PRICE CEILINGS
- Are the opposite of the price floors. Is a government or group imposed price control or
limit on how high price is charged for a product, commodity or service. When the
government imposes a price ceiling, it forbids firms from selling products at a price
above the price ceiling.
RENT CONTROL
- A government program that place a limit on the amount that a landlord can demand for
leasing a home or for renewing a lease. Rent control laws are usually enacted by the
municipalities and the detail vary widely. all living intended to keep living costs
affordable for lower income residents.
- High land values in many communities make it difficult for residents to find affordable
housing. Politicians often attempt to create affordable housing by enacting rent control,
which is a price ceiling on rents. Rent control laws set a maximum price that landlords
can charge tenants.
- This law is highly favorable to the low income makers. They are protected by the law, to
still have a house without paying too much.
ADVANTAGES OF RENT CONTROL
- The poor people will have a house to stay for their family even though they don’t
actually own them.
- Because of the rent control, racist landlords can’t abuse them.
DISADVANTAGES OF RENT CONTROL
- As with the rent control law it increases the discrimination. Consider the greedy people,
if they know that you don’t have a lot of money, they won’t allow you to rent even the
smallest room or house, because they knew, that you have nothing to pay.
THE MARKET FOR HUMAN ORGANS
- Kidneys, heart, ad livers, lungs, pancreas: not items you ever want to run out of. But in
the US, over 86,000 people can’t get a transplant because of an organ shortage. Free
markets correct shortages by raising prices, but under US law it’s illegal to pay
individuals or their families for donated organs.
- This shortage kills thousands people a year in the US who die before they can get a
needed kidney transplant. Some generous souls freely donate their organs after death.
Since its illegal to be paid for such donations, and since many of us prefer not to dwell
 on our organ’s fate after our passing, all too few of us agree to become post-life organ
donors.
LEGAL MEANS AROUND ORGAN SALE-BAN
- 1. LifeSharers- Participants agree to donate organs when they die and in return get
preferential access to organs they might need while they are alive.
- 2. Multiparty Donations- many people voluntarily give a kidney to the sick relatives.
Unfortunately, you can’t give one of your kidneys to just anyone, for it has a genetically
match. Fortunately, economists have developed computer system that helps people
arranged such kidney trades.
HEALTHCARE
- is the maintenance or improvement of health via the prevention, diagnosis, and
treatment of disease, illness, injury, and other physical and mental impairments in allied
health fields.
- When you are older the demand curve of healthcare is high, because you are prone to
any kind of illness at your age. You need a healthcare that can cover all the cost just like
hospital bill when you got sick, or take care of you when you got too old.
- The government has many health care services just like Philhealth, SSS, Pag-ibig, insular
life and many more. if you have an account on that health care, whenever you got sick,
there is always an available assistance for you. they got you covered.
AGRICULTURAL SUBSIDIES
- It is a government incentive paid to agribusiness, agricultural organizations and farms to
supplement their income, manage the supply of agricultural commodities, and influence
the cost and supply of such commodities includes: wheat, corn, cotton, milk, rice,
peanuts, sugar and etc.
- Usually the rich farmers often benefit from this subsidies, because the incentives given
to them seems just like a bonus from the government, because they are already rich,
they can buy all the equipment’s and others outputs needed in farming.
- For those poor farmers, it was like a gift for them, additional capital for the farming
equipments.