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1、Supply,Demand,andGovernmentPolicies1©2012CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.Gov’tControlsonPricesPriceceiling
2、(maximumprice)Alegalmaximumonthepriceatwhichagoodcanbesold(eg.)rentcontrolPricefloor(minimumprice)Alegalminimumonthepriceatwhichagoodcanbesold(eg.)minimumwage2©2012CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedist
3、ributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.ControlsonPricesHowpriceceilingsaffectmarketoutcomes?Notbinding(abovetheequilibriumprice)NoeffectonthepriceorquantitysoldBindingconstraintBelowtheequilibriumpriceShortagearisesSellersmustrationthes
4、carcegoodsWhatkindofrationingmechanisms?3©2012CengageLearning.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.Figure14©2012CengageLearning
5、.AllRightsReserved.Maynotbecopied,scanned,orduplicated,inwholeorinpart,exceptforuseaspermittedinalicensedistributedwithacertainproductorserviceorotherwiseonapassword-protectedwebsiteforclassroomuse.AMarketwithaPriceCeilingPriceofIce-CreamConesQuantityofIce-CreamCones0Demand100(a)APriceC
6、eilingThatIsNotBindingInpanel(a),thegovernmentimposesapriceceilingof$4.Becausethepriceceilingisabovetheequilibriumpriceof$3,thepriceceilinghasnoeffect,andthemarketcanreachtheequilibriumofsupplyanddemand.Inthisequilibrium,quantitysuppliedandquantitydemandedbothequal100cones.Inpanel(b),th
7、egovernmentimposesapriceceilingof$2.Becausethepriceceilingisbelowtheequilibriumpriceof$3,themarketpriceequals$2.Atthisprice,125conesaredemandedandonly75aresupplied,sothereisashortageof50cones.(b)APriceCeilingThatIsBinding3Supply$4PriceceilingEquilibriumpriceEquilibriumquantityP
