Price Controls

Price Controls Surplus When quantity supplied is greater than quantity demanded Often results in producers dropping their prices on goods The invisible hand forces down prices to reach market equilibrium Shortage When quantity demanded is greater than quantity supplied Invisible hand forces prices up; as consumers are less willing to pay the elevated prices

Price Controls Price Ceilings The maximum price a seller is allowed to sell their good for Usually a law or regulation to help maintain fair business practices Set below the market equilibrium price 1970s gasoline prices

Price Controls Price floors The lowest price a seller can supply a good or service Often a law or regulation to ensure that prices do not drop too low In order to be effective, the price floor is set above the equilibrium price EX: Corn production Farmers makes a lot, the price is really appealing Doesn’t help producers since consumers do not want the goods What happens to the surplus??

What happens to the surplus?

Rent control for Colorado? 1) Read the Opinion article about why Colorado needs rent control, then answer the following questions: Is rent control a price ceiling or price floor? What does rent control create for the market? (surplus/shortage) Do you agree or disagree Why? How would this effect you? What does the future look like when you want to rent? (hint: that’s in a few years for most of you!) 2) Read the article why rent control may never be a thing for Coloradoans, then answer the questions: What problems can you understand from rent control? Do you still thing rent control is right or wrong? What does the rental market look like in the long run without rent control? Is this a natural side-effect? Will the market correct itself?