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  • Pertemuan 5: "Price Ceiling"

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    Eli Agustina
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    The document discusses price ceilings and how they can create shortages. It provides an example of a price ceiling set at $3 for a good that would normally sell at an equilibrium price of $3. This creates a shortage of 75 units as suppliers only provide 125 units but demand is for 200 units. Effects of price ceilings mentioned are shortages, non-price rationing, black markets, and corruption. Rent control is discussed as an example of a price ceiling that can destroy cities by creating shortages over the long run as housing supply and demand become more elastic. Minimum wage laws that set a price floor for labor are also discussed as creating a surplus of labor and resulting unemployment.

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    Price Ceiling

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    The document discusses price ceilings and how they can create shortages. It provides an example of a price ceiling set at $3 for a good that would normally sell at an equilibrium price of $3. This creates a shortage of 75 units as suppliers only provide 125 units but demand is for 200 units. Effects of price ceilings mentioned are shortages, non-price rationing, black markets, and corruption. Rent control is discussed as an example of a price ceiling that can destroy cities by creating shortages over the long run as housing supply and demand become more elastic. Minimum wage laws that set a price floor for labor are also discussed as creating a surplus of labor and resulting unemployment.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    3 views12 pages

    Pertemuan 5: "Price Ceiling"

    Uploaded by

    Eli Agustina
    The document discusses price ceilings and how they can create shortages. It provides an example of a price ceiling set at $3 for a good that would normally sell at an equilibrium price of $3. This creates a shortage of 75 units as suppliers only provide 125 units but demand is for 200 units. Effects of price ceilings mentioned are shortages, non-price rationing, black markets, and corruption. Rent control is discussed as an example of a price ceiling that can destroy cities by creating shortages over the long run as housing supply and demand become more elastic. Minimum wage laws that set a price floor for labor are also discussed as creating a surplus of labor and resulting unemployment.

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    © All Rights Reserved
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    of 12

    PERTEMUAN 5

    “Price Ceiling”
    A Price Ceiling That Creates Shortages

    Supply

    Equilibrium
    price

    $3

    2 Price
    ceiling
    Shortage
    Demand

    0 75 125
    Q
    Quantity Quantity
    supplied demanded
    Effects of Price Ceilings

     Shortages
     Non-price rationing
     Black market
     Corruption
    Rent Control

     Rent controls are ceilings placed on the


    rents that landlords may charge their
    tenants.
     The goal of rent control policy is to help
    the poor by making housing more
    affordable.
     One economist called rent control “the best
    way to destroy a city, other than bombing.”
    Rent Control in the Short Run

    Rental Price
    of
    Apartment Supply and
    Supply demand for
    apartments are
    relatively
    inelastic

    Controlled rent

    Shortage

    Demand

    0 Quantity of
    Apartments
    Rent Control in the Long Run
    Rental Price Because the supply
    of and demand for
    Apartment
    apartments are
    more elastic...

    Supply

    …rent control Controlled rent


    causes a large
    shortage
    Shortage
    Demand

    0 Quantity of
    Apartments
    A Price Floor That Creates Surplus
    P

    Supply
    Surplus

    $4 Price floor

    $3

    Equilibrium
    price

    Demand
    Q
    0 80 120
    Quantity Quantity
    demanded supplied
    The Minimum Wage

    An important example of a price floor is the minimum wage. Minimum


    wage laws dictate the lowest price possible for labor that any employer
    may pay.
    The Minimum Wage

    A Free Labor Market


    Wage
    Labor
    supply

    Equilibrium
    wage

    Labor
    demand
    0 Equilibrium Quantity of
    employment Labor
    The Minimum Wage
    A Labor Market with a Minimum
    Wage
    Wage
    Labor
    Labor surplus supply
    (unemployment)
    Minimum
    wage

    Labor
    demand
    0 Quantity Quantity Quantity of Labor
    demanded supplied
    Assignment

     Review Part One (P1- 59)


     Do Exercises on P58-59
     Preview Chapter 4 (P62-79)
    Thanks

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