1. Price Floors & Ceilings Government Price Controls in a Free Market?

2. Price Floor A MINIMUM price set by the govt that is ABOVE market equilibrium; nothing can be sold below the given price

3. Benefits Costs Raise the Minimum Wage to $8 00/hr

4. Minimum Wage: Gov’t Imposed Price Floor D1D1 S1S1 $5 15 E1E1 Price Floor. Surplus of Supply $ 8 00 New Minimum wage law set at 8 00 /hr Min. Wage Workers

5. Price Ceiling A MAXIMUM price set by govt that is BELOW equilibrium price; nothing can be sold above this price

6. Benefits Costs Rent Control

7. Rent Control: Gov’t Imposed Price Ceiling D1D1 S1S1 $900 E1E1 Price Ceiling. Shortage of Supply $ 700 Price Ceiling imposed of $700 3,000 Apartments

8. Summary Price floors: (example: min. wage) A bove market equilibrium cause a surplus of supply Below market equilibrium have no effect Price Ceilings: (example: rent control) A bove market equilibrium have no effect Below market equilibrium cause a shortage of supply