Micro Lesson 7

Price Controls

Florida’s Price Gouging Laws

Prior to my death, I would be willing to donate a kidney to a stranger for AT

LEAST• A) free

• B) $1,000

• C) $5,000

• D) $10,000

• E) $50,000

• F) $100,000

• G) $500,000

• H) $1,000,000

• I) I would not donate a kidney for any price.

Distorting Market Outcomes

• Price Ceilings create shortages (rent control in Manhattan)

Distorting Market Outcomes Continued

• Price Floors create surpluses (minimum wage)

The Upside-Down House Rule:

• The floor’s up high, & the ceiling’s down low.

With Your Partners

Complete The Handout

Clicker Quiz

With Your Partners

The minimum wage is a type of

• A price floor

• B comparable worth

• C price ceiling

• D marginal price

People against raising the minimum wage argue that when a legal

minimum wage is established above the equilibrium wage in the labor

marketA there will be an increase inunemploymentB the quantity of labor demanded by firmswill increaseC the quantity of labor supplied willdecreaseD employers will have an incentive to usemore labor and less capital

Suppose the government set a bindingprice ceiling at $2. What would be thequantity demanded and the quantitysupplied?

Organizers of many high-interest sporting events such as the Super Bowl and the World Series usually set ticket prices lower than the equilibrium price, citing

fairness to the public as their reason. What names do economists give to the resulting set

price and disequilibrium situation?

• A price ceiling; surplus

• B price ceiling; shortage

• C price floor; shortage

• D price floor; surplus

Which of the following is considered a negative side-effect

of minimum wage?

• A) full employment

• B) increased interest rates

• C) unemployment

• D) failure to meet equilibrium production

The Economics Dance