ECON 1201 Lecture Notes - Lecture 7: Price Ceiling, Price Controls, Price Floor
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Chapter 5 : price controls and quotas- meddling with markets. Price controls: legal restrictions on how high or low a market price may go. Price ceiling: a maximum price sellers are allowed to charge for a good or service. Price floor: a minimum price buyers are required to pay for a good or service. Market prices do not necessarily please buyers or sellers: they may lobby the gov"t to help them by altering the price. Price controls distort signals that would help the goods get allocated their highest-valued uses. Create shortages leads to bribery and wasteful lines. In order to deal with more consumers than goods sellers respond in. Black markets: a market in which goods or services are bought and sold illegally- either because they are prohibited or because the equilibrium prices is illegal. They do benefit some people (who are typically better organized and more vocal than those who are harmed by them)
