4-Price Floors and Ceilings

  1. Disagreements in price are inevitable, sellers want a higher price and buyers want a lower price
  2. Only reason to set restrictions is to avoid market equilibrium
    1. Floors
      1. Take a farmer getting a guaranteed price on goods
        1. Quantity supplied is high,
        2. Price of farmland goes up
        3. Send surplus to third world countries
          1. Their farmers have to, now compete against free food
          2. Provides a short-term boost but has a negative long term effect
      2. Not all farmers need the help
      3. Set both a price floor and ceiling and you have the soviet union, you cant subsidize forever
    2. Instead look for alternatives
      1. In the case of rent, use vouchers, change zoning laws
      2. Income based
  3. Economists look at all costs, politicians look at political ones.

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