Chapta 6

This Chapter was about floors, ceilings, shortages, and surpluses. A price ceiling is the legal maximum on which a good can be sold at. A price floor is the legal minimum that a good can be sold at. If a price ceiling is below equilibrium then it means that it is binding. If the price floor is above equilibrium it is binding. Binding means that it is not allowing the market to reach equilibrium and therefore results in a shortage or surplus of the good. This is bad because either there is too much of the good and it goes to waste or not everyone can get the good. The U.S. set a price ceiling on oil and OPEC raised the price of crude oil causing long lines at gas pumps because there was a shortage of oil. Another example of a price ceiling is rent control. If there is a rent control it will cause a shortage in the amount of apartments available.