Thursday, May 22, 2008

Price Controls

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Economists use supply and demand analysis to examine most issues that affect the economy. For example, the supply & demand framework is used to examine minimum wage laws and rent controls.

Price controls are legal restrictions on the prices charged in the market for a product or resource.

A price floor is the minimum price that can be legally charged in a market. The minimum wage is an example of a price floor.

A price ceiling is the maximum price that can be legally charged in a market. Rent controls for apartments are an example of a price ceiling.

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