1. KRUGMAN'S MACROECONOMICS for AP* 8 Margaret Ray and David Anderson Module Supply and Demand: Price Controls (Ceilings and Floors)

2. What you will learn in this Module : The meaning of price controls, one way government intervenes in markets How price controls can create problems and make a market inefficient Why economists are often deeply skeptical of attempts to intervene in markets Who benefits and who loses from price controls, and why they are used despite their well-known problems Key Terms Price Controls Price Ceiling Price Floor Inefficient allocation to consumers Wasted Resources Inefficient Low Quality Black Market Minimum Wage Inefficient allocation of sales among sellers Inefficiently High Quality

3. Unpopular market prices Political pressure Why Governments Control Prices

4. Legal maximum price Examples Resource prices during WWII Oil Prices in1970s California electricity New York City apartments Price Ceilings

5. Modeling a Price Ceiling

6. How a Price Ceiling Causes Inefficiency Inefficient Allocation to Consumers Wasted Resources Inefficiently Low Quality Black Markets

7. So Why Are There Price Ceilings? Benefit some Uncertainty Lack of understanding

10. Legal minimum price Examples Agricultural products Minimum wage Trucking Air travel Price Floors

11. Modeling a Price Floor

12. How a Price Floor Causes Inefficiency Inefficiently Low Quantity Inefficient Allocation of Sales Among Sellers Wasted Resources Inefficiently High Quality Illegal Activity

13. So Why Are There Price Floors? Benefit some Disregard Lack of understanding

16. Module Supply and Demand: Quantity Controls KRUGMAN'S MACROECONOMICS for AP* 9 Margaret Ray and David Anderson

17. What you will learn in this Module : The meaning of quantity controls, another way government intervenes in markets How quantity controls create problems and can make a market inefficient Who benefits and who loses from quantity controls, and why they are used despite their well-known problems Terms Quality control Quota License Demand Price Supply Price Wedge Quota Rent Deadweight loss

18. Quantity Control – Quota=An upper limit on the quantity of a good that can be bought or sold Licenses=gives the owner the right to supply the good Controlling Quantities

19. The Anatomy of Quantity Controls

20. Demand Price=the price at which the consumers will demand that quantity Supply Price=the price producers will supply that quantity Wedge=between demand price and supply price Quota Rent=the difference between demand price and supply price

21. The Cost of Quantity Controls Deadweight Loss=the loss due to market intervention