ACDC Econ Lecture: Price Controls

Introduction

• Instructor: Mr. Clifford
• Topic: Price Controls in Economics

Price Ceiling

• Definition: A price cap set by the government to keep prices below equilibrium.
  • Example: Gas prices in California.
    • Equilibrium price: $4 per gallon, 100 units.
    • Proposed price ceiling: $1 per gallon.
  • Effect: Leads to increased demand and decreased supply.
    • Demand increases to 200 units.
    • Supply decreases to 50 units.
    • Result: Shortage of 150 gallons.
• Conclusion: Price ceilings can harm consumers despite the intent to make products cheaper.

Price Floor

• Definition: A minimum price set by the government to keep prices above equilibrium.
  • Example: Corn prices.
    • Equilibrium price: $10 for 50 units.
    • Proposed price floor: $30.
  • Effect: Increases supply and decreases demand.
    • Supply increases to 100 units.
    • Demand decreases to 30 units.
    • Result: Surplus of corn.
• Conclusion: Price floors can lead to surplus and are not always beneficial for producers.

Key Concepts

• Price Ceiling: Must be below equilibrium to affect the market.
• Price Floor: Must be above equilibrium to affect the market.
• Impact on Markets: Government controls can lead to shortages or surpluses.

Market Economics Overview

• Competitive markets should generally be left alone to avoid misallocation of resources.

Course Relevance

• Microeconomics: Focuses on detailed market analysis, taxes, quotas, elasticity.
• Macroeconomics: Studies the overall economy, GDP, unemployment, inflation, aggregate demand and supply.

Additional Resources

• Mr. Clifford’s YouTube Channel: Videos on Micro- and Macroeconomics.
• Recommended Videos: Micro- and Macroeconomics summaries.

Conclusion

• Subscribe and visit the channel for more educational content.

End of Lecture