2. Chapter 3 Government Control of Prices in Mixed Systems

3. 3 - 3 McGraw-Hill/Irwin Economics of Social Issues, 17/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Price Controls Price Ceilings Price Floors

4. 3 - 4 McGraw-Hill/Irwin Economics of Social Issues, 17/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. S S D D A B Rent Control Rent per unit $ Quantity (thousands of units per year) 500 400 81011 A 600

5. 3 - 5 McGraw-Hill/Irwin Economics of Social Issues, 17/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Rent Control Rent per unit $ Quantity (thousands of units per year) S S 500 400 81011 A D D 600 D1D1 D1D1 13 800 S1S1 S1S1 12.5 525

6. 3 - 6 McGraw-Hill/Irwin Economics of Social Issues, 17/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Minimum Wages - Market Demand for Labor Quantity (thousands of hours per week) Wage rate ($)D D

7. 3 - 7 McGraw-Hill/Irwin Economics of Social Issues, 17/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. The Demand for Labor by One Employer (1)(2)(3)(4)(5) Units of Labor Total Production Marginal Product Marginal Revenue Marginal Revenue Product MRP = (3) x (4) 00 155$.50$2.50 22520$.5010.00 35025$.5012.50 47020$.5010.00 58010$.505.00 6855$.502.50 7861$.50.50

8. 3 - 8 McGraw-Hill/Irwin Economics of Social Issues, 17/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. The Demand for Labor by One Employer Quantity of Labor 1234567 2.50 5.00 10.00 12.50.50

9. 3 - 9 McGraw-Hill/Irwin Economics of Social Issues, 17/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Market Supply of Labor Quantity (thousands of hours per week) Wage rate ($)S S Substitution Effect Income Effect

10. 3 - 10 McGraw-Hill/Irwin Economics of Social Issues, 17/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Effects of the Minimum Wage Quantity (thousands of hours per week) Wage rate ($)D D S S 9 5.00 6.00 8.59.25

11. 3 - 11 McGraw-Hill/Irwin Economics of Social Issues, 17/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. Alternative Analysis of the Minimum Wage Quantity (thousands of hours per week) Wage rate ($)D D S S 9 5.00 6.00