Econ 14 Files
Econ 14 Lecture
Notes
Lecture 8: Price Controls
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Economics 14 |
Lecture 8: Price Controls
video on home heating oil
price ceilings and floors
Video on Home Heating Oil
 | Heating oil prices rose because the cold winter increased the demand for heating oil. Heating oil suppliers hold very little inventory, so the supply curve is very steep: the supply of heating oil responds very little to changes in price. |
Price Ceilings and Floors
A price floor is a legal minimum price. An example is the minimum wage. A price floor creates an excess supply or surplus. A price ceiling is a legal maximum price. Rent control is an example. A price ceiling leads to a situation of excess demand or a shortage.
There are 4 alternatives to the market as a way of allocating a scarce good:
- standing in line
- preferred customers
- rationing by coupon
- black markets
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David A. Latzko Business and Economics Division Pennsylvania State University, York Campus office: 13 Main Classroom Building phone: (717) 771-4115 fax: (717) 771-4062 e-mail: web: www.yk.psu.edu/~dxl31 |
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