Alright. Let's try this example. Consider the following graph. A price floor of $20 would cause a surplus of surplus of 1,000 units, a shortage of 1,000 units or no effect. All right, so the first thing we want to check when we get a price floor or price ceiling problem is whether or not the price floor or price ceiling is going to be effective, right? And I use my trick of that little house to figure out if it's effective or not, right? Because you're on the test and you're like man, is price floor, price ceiling, which one's below equilibrium, which one's above equilibrium? Well, just remember that the ceiling is the one that makes the house with the ceiling price that's effective, right? We've got the house right here and this ceiling of the house is our ceiling price that makes an effective price ceiling, right? So boom, right there I remembered on the test that effective price ceilings are below equilibrium, right? That's what we see in this problem, an equilibrium of 25 and an effective price ceiling below equilibrium. So then now that I've figured out ceilings I know that floors are the opposite, right? And in this question we're talking about price floors, right? So now that I know that an effective price ceiling is below equilibrium from my house trick, I know that an effective price floor is above equilibrium, right? Above and I just figured this out just from the little house trick. So now I can go back to my graph. I'm going to erase all this, right? Well, I can leave the p star and so all of that was just to think was it effective or ineffective? Boom. We know that an effective price floor would be above equilibrium and what do we have here? A price floor of $20 which is below equilibrium, right? So this is an ineffective price floor and just like that we know that the answer is going to be no effect, right? At this price floor the government set a minimum of $20 that could be charged, but it doesn't matter to the market because they were trading at $25 which is above the minimum, right? And that's okay, that's within the law and they're just going to keep doing what they were doing and trading at $25. So the answer here is no effect. Let's go ahead and move on to the next video.
Table of contents
- 0. Basic Principles of Economics1h 5m
- Introduction to Economics3m
- People Are Rational2m
- People Respond to Incentives1m
- Scarcity and Choice2m
- Marginal Analysis9m
- Allocative Efficiency, Productive Efficiency, and Equality7m
- Positive and Normative Analysis7m
- Microeconomics vs. Macroeconomics2m
- Factors of Production5m
- Circular Flow Diagram5m
- Graphing Review10m
- Percentage and Decimal Review4m
- Fractions Review2m
- 1. Reading and Understanding Graphs59m
- 2. Introductory Economic Models1h 10m
- 3. The Market Forces of Supply and Demand2h 26m
- Competitive Markets10m
- The Demand Curve13m
- Shifts in the Demand Curve24m
- Movement Along a Demand Curve5m
- The Supply Curve9m
- Shifts in the Supply Curve22m
- Movement Along a Supply Curve3m
- Market Equilibrium8m
- Using the Supply and Demand Curves to Find Equilibrium3m
- Effects of Surplus3m
- Effects of Shortage2m
- Supply and Demand: Quantitative Analysis40m
- 4. Elasticity2h 26m
- Percentage Change and Price Elasticity of Demand19m
- Elasticity and the Midpoint Method20m
- Price Elasticity of Demand on a Graph11m
- Determinants of Price Elasticity of Demand6m
- Total Revenue Test13m
- Total Revenue Along a Linear Demand Curve14m
- Income Elasticity of Demand23m
- Cross-Price Elasticity of Demand11m
- Price Elasticity of Supply12m
- Price Elasticity of Supply on a Graph3m
- Elasticity Summary9m
- 5. Consumer and Producer Surplus; Price Ceilings and Floors3h 45m
- Consumer Surplus and Willingness to Pay38m
- Producer Surplus and Willingness to Sell26m
- Economic Surplus and Efficiency18m
- Quantitative Analysis of Consumer and Producer Surplus at Equilibrium28m
- Price Ceilings, Price Floors, and Black Markets38m
- Quantitative Analysis of Price Ceilings and Price Floors: Finding Points20m
- Quantitative Analysis of Price Ceilings and Price Floors: Finding Areas54m
- 6. Introduction to Taxes and Subsidies1h 46m
- 7. Externalities1h 12m
- 8. The Types of Goods1h 13m
- 9. International Trade1h 16m
- 10. The Costs of Production2h 35m
- 11. Perfect Competition2h 23m
- Introduction to the Four Market Models2m
- Characteristics of Perfect Competition6m
- Revenue in Perfect Competition14m
- Perfect Competition Profit on the Graph20m
- Short Run Shutdown Decision33m
- Long Run Entry and Exit Decision18m
- Individual Supply Curve in the Short Run and Long Run6m
- Market Supply Curve in the Short Run and Long Run9m
- Long Run Equilibrium12m
- Perfect Competition and Efficiency15m
- Four Market Model Summary: Perfect Competition5m
- 12. Monopoly2h 13m
- Characteristics of Monopoly21m
- Monopoly Revenue12m
- Monopoly Profit on the Graph16m
- Monopoly Efficiency and Deadweight Loss20m
- Price Discrimination22m
- Antitrust Laws and Government Regulation of Monopolies11m
- Mergers and the Herfindahl-Hirschman Index (HHI)17m
- Four Firm Concentration Ratio6m
- Four Market Model Summary: Monopoly4m
- 13. Monopolistic Competition1h 9m
- 14. Oligopoly1h 26m
- 15. Markets for the Factors of Production1h 33m
- The Production Function and Marginal Revenue Product16m
- Demand for Labor in Perfect Competition7m
- Shifts in Labor Demand13m
- Supply of Labor in Perfect Competition7m
- Shifts in Labor Supply5m
- Differences in Wages6m
- Discrimination6m
- Other Factors of Production: Land and Capital5m
- Unions6m
- Monopsony11m
- Bilateral Monopoly5m
- 16. Income Inequality and Poverty35m
- 17. Asymmetric Information, Voting, and Public Choice39m
- 18. Consumer Choice and Behavioral Economics1h 16m
5. Consumer and Producer Surplus; Price Ceilings and Floors
Price Ceilings, Price Floors, and Black Markets
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