Economic Policy

Market Intervention

• Price Ceiling
  • Price control decreases the supply, but increases the demand. Thus shortage is created.
  • Market will eventually find a way to get rid of the line, but not in the most efficient way.
    • Lower quality product
    • Charge an extra deposit
    • Black market
• Price Floor
  • Minimum wage increases unemployment. Perhaps the increased wage comes at the expense of the people leaving the industry?
  • Destroying the corn and milk to maintain a high price, so that agriculture stays in the US.