ECO 201 Chapter Notes - Chapter 6: Economic Equilibrium, Price Ceiling, Working Poor
8 Feb 2018
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Case study: lines at the gas pump: what was responsible for long gas lines, the increase in the price of crude oil raised the cost of producing gasoline, and this reduced the supply of gasoline. In an unregulated market, this shift in supply would have raised the equilibrium price of gasoline, and no shortage would have resulted. How price floor affects market outcomes: price floors are an attempt by the government to maintain prices at other than equilibrium levels. Market forces naturally move the economy to the equilibrium, and the price floor has no effect. Case study: rent control in the short run and the long run: one common example of a price ceiling is rent control, the goal of this policy is to help the poor by making housing more affordable. Economists often criticize rent control, arguing that it is a highly inefficient way to help the poor raise their standard of living.
