1. Managing Prices 5.3 Price Ceilings —A government regulation that establishes a maximum price for a particular good or service. –Ex. Affordable housing/ Rent controls Price Floors —A government regulation that establishes a minimum level for prices. Ex. Agricultural prices

2. Price Ceiling Source: Livingeconomics.org

3. Price Floor Source: www.flatworldknowledge.com

4. Consequences of Setting Prices 5.3 Interfering with Supply/Demand can cause unintended consequences and impair equilibrium. Ex. Affordable housing--$600 ceiling/Equilibrium price is $800. –Supply of housing shrinks, Why? Profits—Up or down? New housing supply – Up or down? Condition of existing rental units?

5. Rationing 5.3 Rationing – A system in which a government or other institution decides how to distribute a product. Ex. WW II—Tires, sugar, butter, coffee Ex. Cuba today under communism/socialism Ticket prices to football games(Supply/Demand)? Ration tickets to students to keep affordable Consequences : Unfair, Expensive, Creates black markets

6. Consequences of Rationing 5.3 1.Unfairness —Gives special treatment to students, alumni, etc. 2.Cost —Can be costly to implement Takes a lot of hours to track/Hire people. 3.Black Markets —Rationing tends to encourage illegal charging of higher than official prices for an event, product, ( Unfair). (Opportunity for fakes).