Price Controls

A binding maximum legal price in a market

• Price ceiling

• Price floor

Who are price ceilings intended to benefit?

• Consumers

• Producers

• Government

• Employees

Shortages, lower quality goods, and increased search costs, are all associated with

• Price ceilings

• Price floors

Rent control, an attempt to make housing more attainable when prices rise too high is an example of a

• Price ceiling

• Price floor

Which of the following is an argument in support of rent control?

• Lower rent prices discourage incentives to build additional housing.

• Housing prices in certain areas are rising faster than wages.

• Rent control can cause a shortage of housing.

• Quality of existing apartments will decrease.

A binding legal minimum price in a market

• Price ceiling

• Price floor

Price floors are intended to protect

• Sellers of a good or service

• Consumers of a good or service

Binding price floors often result in a market

• Surplus

• Shortage

Which of the following is an argument supporting an increase to the minimum wage?

• 98.5% of workers earn higher than minimum wage.

• Wages have not kept pace with increases in worker productivity.

• There will be fewer jobs available for low-skilled workers.

• It may increase the cost of bringing goods and services to market.

Where would a binding price ceiling need to be set in this market?

• $1500

• $1200

• $900

• $600