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Consumer and Producer Surplus; Price Ceilings and Floors

# Price Ceilings, Price Floors, and Black Markets

As I always say sometimes, "you can't go higher than the ceiling and you can't go lower than the floor."
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concept

## Price Ceilings 7m
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example

## Price Ceilings 2m
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Alright. So we've got an example here, um consider the following graph, a price ceiling of \$20 would cause a surplus of 500 units. A shortage of 500 units surplus of 1000 shortage of 1000 or no effect. All right so we have to remember with price ceilings they set a price too low if they're effective right? And when the price is too low, the demand is gonna outweigh the supply. So we're gonna be in a situation where there's a shortage if there's this price ceiling if it's effective. Right? So off the bat we can cancel these that's a surplus. We know it's not gonna be any of those answers but even if we can't do that, remember that specific knowledge on the test, we do have the graph and let's go ahead and look at the graph and see if we can figure out the surplus or the shortage or what effect we have here. So the first thing we want to check is is this an effective price ceiling? And my trick remember is the house trick. So notice that at this price of \$20 we do get a house right? We get the house. So we can say that it is an effective price ceiling cause we got the house there. So we know that it's going to affect the market and it's it's going to do something here. So let's see what happens here. The government says you can't charge a price more than 20 the market wants to trade at 25. So this is going to be effective. So what do we have here? This is gonna be the supply curve, Right? Because we have our downward demand double D. S. Supply is the other one. Right? So what happens here at the price of 2500 is going to be our quantity supplied. Right? That's where the 20 touches the supply curve and 1000 over here. That's gonna be the quantity demanded. Right? That's where the 20 is touching the demand curve. So what do you have? We have a quantity supplied of 500 a quantity demanded of 1000. There's a shortage. Right? People want 1000 but there's only 500 available. So that difference there between the 500 1000 is the shortage. Right So the shortage isn't 1000 there's not 1000 shortage there's still 500 units available. It's the other 500 that are missing. That's the shortage. So the quantity demanded being 1000 minus the quantity supply of 500. If we subtract those we're going to get 500 which is the shortage. So we have a shortage of 500 units in this case. All right so let's go on let's go ahead and go to the next video
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Problem

When the government imposes a binding price ceiling, it causes

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Problem

A price ceiling will have no impact on a market if it is set

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Problem

All of the following are problems associated with price ceilings except:

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concept

## Price Floors and Black Markets 8m
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example

## Price Floors 2m
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