Price Controls Price Controls Surplus When quantity supplied

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 • 1970 s 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?