ECON 2010 Lecture Notes - Lecture 10: Social Safety Net, Price Ceiling, Price Controls

• School: CU-Boulder
• Department: Economics
• Course: ECON 2010
• Professor: Zacharyszlendak

Document Summary

What are the distributional effects of a minimum wage. Benefits of a large government: social safety net, good infrastructure, national defense. Optimal size of government is hard to determine. Deficit: annual difference between federal revenue and expenditure. Debt: all of the deficits added together. Some regulation is probably wasteful: doctors and lawyers should have licenses but what about make-up artists, locksmiths, etc. Some regulation is probably important: us government imposes laws against products containing dangerous chemical that are hard for consumers to detect. Gov. tries to correct bad market outcomes. One of the tools it has to influence markets is a price control and there are 2 main types. Price ceiling cannot legally buy or sell above this price. Price floor cannot legally buy or sell below this price. Price controls are politically easy to accomplish comparted to come other policies, so we often see them happen in response to problems that are politically difficult to fix.