Intro to Economics - Price Controls

1. PRICE CONTROLS
Introduction to Economics
1

2. Minimum Wage (Price Floor)
• Making employers pay workers for more than the
value of their work/production
Results:
• Fewer jobs; higher unemployment
 Cannot gain experience/skills
• Raises the expectations of others
• Retaliate:
 Discrimination
 Fewer benefits
→ Ineffectiveness of the system 2

3. Rent Control (Price Ceiling)
• Making landlords lease their apartments at a rent
below its real value
Results:
• Less construction
• Deterioration/abandonment
• Retaliate:
 Discrimination
 Key money
 Lower quality; less maintenance
• Judicial/bureaucratic costs
→ More homelessness 3

4. Any Solution?
•Yes, make the markets more competitive
•Government intervention/regulation only
reduces efficiency and does not achieve its
intended objectives
Competitive equilibrium:
 Lowest price
 Highest quantity
 Best quality
Competition = recognizing the incentives
Government intervention = ignoring the incentives4