The Short Side of the Market

Consider the market for rental apartments in a city, represented by the following weekly supply and demand schedule:

If the city government imposes a legally-mandated maximum rent of $800 per month, what will be the outcome in this market?

A government-imposed price ceiling set above the market-clearing price will cause a persistent shortage of the good.

Analyzing the Impact of a Minimum Wage

A company sets a wage for its workers, knowing that it cannot perfectly monitor their effort. If a worker is caught shirking (not working), they are fired. A new government policy is introduced that significantly increases the duration and amount of unemployment benefits a fired worker can receive. From the company's perspective, how does this policy change affect the wage it must offer to motivate its employees to work hard, and why?

Comparing Price Ceilings and Price Floors

Calculating Market Surplus from a Price Floor

Match each price control scenario to its resulting market condition. The 'market-clearing price' is the price where the quantity sellers are willing to provide equals the quantity buyers wish to purchase.

Consider the market for a specific agricultural good, where the price is measured in dollars per bushel and quantity is in thousands of bushels per month. The market-clearing price, where the quantity sellers are willing to provide equals the quantity buyers wish to purchase, is $10. At this price, 200,000 bushels are bought and sold. The government, aiming to support farmers, imposes a price control legally requiring the price to be no less than $12 per bushel. At this new price of $12, buyers are only willing to purchase 150,000 bushels, while farmers are willing to supply 220,000 bushels. What is the direct result of this price control in the market?

Evaluating a Rent Control Policy

Concert Ticket Pricing Scenario