Lecture on Price Controls

Introduction

• Speaker: Mr. Clifford from ACDC Econ
• Topic: Price controls

Price Controls

• Definition: Government policies to set max/min prices

Price Ceiling

• Example: Gas prices in California at $4/gallon, 100 units
  • Proposed ceiling: $1/gallon
• Impact:
  • Increases quantity demanded to 200
  • Reduces quantity supplied to 50
  • Results in a shortage of 150 gallons
  • Generally harms consumers due to less availability
• Conclusion:
  • Competitive markets should be largely left alone
  • Government intervention can cause shortages

Price Floor

• Example: Corn price at $10 for 50 units
  • Proposed floor: $30
• Impact:
  • Increases quantity supplied to 100
  • Reduces quantity demanded to 30
  • Results in a surplus
• Conclusion:
  • Does not help producers as intended
  • Competitive markets should be left alone

Common Confusions

• Ceiling: Must be below equilibrium to have a market effect
• Floor: Must be above equilibrium to have a market effect

Economics Courses

• Macroeconomics:
  • Topics: GDP, unemployment, inflation, Aggregate Demand/Supply
• Microeconomics:
  • Topics: Taxes, quotas, elasticity
• Unit 1 Topics: Production possibilities curve, scarcity, absolute & comparative advantage, supply & demand

Additional Resources

• Channel Menu: Links for Micro- and Macroeconomics
• Summary Videos: Quick explanations of key concepts

Conclusion

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