Module 7: Price Controls and Quantity Controls

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Why Governments Control Prices and Quantities

You learned in Module 6 that a market moves to equilibrium—that is, the market price moves to the level at which the quantity supplied equals the quantity demanded. But this equilibrium price does not necessarily please either buyers or sellers. Buyers would always prefer to pay less and sellers would always like to get more money for what they sell.

As a result, there is often a strong political demand for governments to intervene in markets. And powerful interests can make a compelling case that a market intervention favoring them is “fair.” When a government intervenes to regulate prices, we say that it imposes price controls. Price controls typically take the form of either an upper limit, a price ceiling, or a lower limit, a price floor.

When a government intervenes to regulate quantities, we say that it imposes a quantity control, or quota. Typically the government limits quantity in a market by issuing licenses so that only people with a license can legally supply the good. New York’s taxi medallion is an example of such a license.

Unfortunately, it’s not that easy to tell a market what to do. As we will now see, when a government tries to legislate prices or quantities there are certain predictable and unpleasant side effects.

Price Ceilings

Aside from rent control, a law that prevents landlords from raising rents except when specifically given permission, there are not many price ceilings in the United States today. But at times they have been widespread.

Price ceilings are typically imposed during crises—wars, harvest failures, natural disasters—because these events often lead to sudden price increases that hurt many people but produce big gains for a lucky few. The U.S. government imposed ceilings on many prices during World War II: the war sharply increased demand for raw materials, such as aluminum and steel, and price controls prevented those with access to these raw materials from earning huge profits.

Price controls on oil were imposed in 1973, when an embargo by Arab oil-exporting countries seemed likely to generate huge profits for U.S. oil companies. Price controls were instituted again in 2012 by New York and New Jersey authorities in the aftermath of Hurricane Sandy as gas shortages led to rampant price-gouging.

Rent control in New York is, believe it or not, a legacy of World War II: it was imposed because wartime production created an economic boom, which increased demand for apartments at a time when the labor and raw materials that might have been used to build them were being used to win the war instead. Although most price controls were removed soon after the war ended, New York’s rent limits were retained and gradually extended to buildings not previously covered, leading to some very strange situations.

How a Price Ceiling Causes Inefficiency

To see what can go wrong when a government imposes a price ceiling on an efficient market, consider Figure 7-1, which shows a simplified model of the market for apartments in New York. For the sake of simplicity, we imagine that all apartments are exactly the same and so would rent for the same price in an unregulated market.

Without government intervention, the market for apartments reaches equilibrium at point E with a market rent of $1,000 per month and 2 million apartments rented.

The table in the figure shows the demand and supply schedules; the demand and supply curves are shown on the left. We show the quantity of apartments on the horizontal axis and the monthly rent per apartment on the vertical axis. You can see that in an unregulated market the equilibrium would be at point E: 2 million apartments would be rented for $1,000 each per month.

Now suppose that the government imposes a price ceiling, limiting rents to a price below the equilibrium price—say, no more than $800.

Figure 7-2 shows the effect of the price ceiling, represented by the line at $800. At the enforced rental rate of $800, landlords have less incentive to offer apartments, so they won’t be willing to supply as many as they would at the equilibrium rate of $1,000. They will choose point A on the supply curve, offering only 1.8 million apartments for rent, 200,000 fewer than in the unregulated market.

The black horizontal line represents the government-imposed price ceiling on rents of $800 per month. This price ceiling reduces the quantity of apartments supplied to 1.8 million, point A, and increases the quantity demanded to 2.2 million, point B. This creates a persistent shortage of 400,000 units: 400,000 people who want apartments at the legal rent of $800 but cannot get them.

At the same time, more people will want to rent apartments at a price of $800 than at the equilibrium price of $1,000; as shown at point B on the demand curve, at a monthly rent of $800 the quantity of apartments demanded rises to 2.2 million, 200,000 more than in the unregulated market and 400,000 more than are actually available at the price of $800. So there is now a persistent shortage of rental housing: at that price, 400,000 more people want to rent than are able to find apartments.

Do price ceilings always cause shortages? No. If a price ceiling is set above the equilibrium price, it won’t have any effect. Suppose that the equilibrium rental rate on apartments is $1,000 per month and the city government sets a ceiling of $1,200. Who cares? In this case, the price ceiling won’t be binding—it won’t actually constrain market behavior—and it will have no effect.

Price ceilings do create inefficiency in at least four distinct ways and can be seriously harmful as a result.

Inefficient Allocation to ConsumersRent control doesn’t just lead to too few apartments being available. It can also lead to misallocation of the apartments that are available: people who badly need a place to live may not be able to find an apartment, while some apartments may be occupied by people with much less urgent needs.

Rent control often leads to the misallocation of available apartments.

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In the case shown in Figure 7-2, 2.2 million people would like to rent an apartment at $800 per month, but only 1.8 million apartments are available. Of those 2.2 million who are seeking an apartment, some want an apartment badly and are willing to pay a high price to get one. Others have a less urgent need and are only willing to pay a low price, perhaps because they have alternative housing.

An efficient allocation of apartments would reflect these differences: people who really want an apartment will get one and people who aren’t all that eager to find an apartment won’t. In an inefficient distribution of apartments, the opposite will happen: some people who are not especially eager to find an apartment will get one and others who are very eager to find an apartment won’t.

Because people usually get apartments through luck or personal connections under rent control, it generally results in an inefficient allocation to consumers of the few apartments available.

Wasted ResourcesAnother reason a price ceiling causes inefficiency is that it leads to wasted resources: people expend money, effort, and time to cope with the shortages caused by the price ceiling. Back in 1979, U.S. price controls on gasoline led to shortages that forced millions of Americans to spend hours each week waiting in lines at gas stations. The opportunity cost of the time spent in gas lines—the wages not earned, the leisure time not enjoyed—constituted wasted resources from the point of view of consumers and of the economy as a whole.

Inefficiently Low QualityYet another way a price ceiling causes inefficiency is by causing goods to be of inefficiently low quality. Inefficiently low quality means that sellers offer low-quality goods at a low price even though buyers would rather have higher quality and are willing to pay a higher price for it.

Again, consider rent control. Landlords have no incentive to provide better conditions because they cannot raise rents to cover their repair costs but are able to find tenants easily. In many cases, tenants would be willing to pay much more for improved conditions than it would cost for the landlord to provide them—for example, the upgrade of an antiquated electrical system that cannot safely run air conditioners or computers. But any additional payment for such improvements would be legally considered a rent increase, which is prohibited. Indeed, rent-controlled apartments are notoriously badly maintained, rarely painted, subject to frequent electrical and plumbing problems, and sometimes even hazardous to inhabit.

This whole situation is a missed opportunity—some tenants would be happy to pay for better conditions, and landlords would be happy to provide them for payment. But such an exchange would occur only if the market were allowed to operate freely.

Black MarketsAnd that leads us to a last aspect of price ceilings: the incentive they provide for illegal activities, specifically the emergence of black markets. One type of black market activity is illegal subletting by tenants. But it does not stop there. Clearly, there is a temptation for a landlord to say to a potential tenant, “Look, you can have the place if you slip me an extra few hundred in cash each month”—and for the tenant to agree, if he or she is one of those people who would be willing to pay much more than the maximum legal rent.

What’s wrong with black markets? In general, it’s a bad thing if people break any law, because it encourages disrespect for the law in general. Worse yet, in this case illegal activity worsens the position of those who try to be honest.

So Why Are There Price Ceilings?

Given the unpleasant consequences of price ceilings, why do governments still sometimes impose them?

One answer is that although price ceilings may have adverse effects, they do benefit some people. In practice, New York’s rent-control rules—which are more complex than our simple model—hurt most residents but give a small minority of renters much cheaper housing than they would get in an unregulated market. And those who benefit from the controls may be better organized and more vocal than those who are harmed by them.

Also, when price ceilings have been in effect for a long time, buyers may not have a realistic idea of what would happen without them. In our previous example, the rental rate in an unregulated market (Figure 7-1) would be only 25% higher than in the regulated market (Figure 7-2): $1,000 instead of $800. But how would renters know that? Indeed, they might have heard about black market transactions at much higher prices and would not realize that these black market prices are much higher than the price that would prevail in a fully unregulated market.

A last answer is that government officials often do not understand supply and demand analysis! It is a great mistake to suppose that economic policies in the real world are always sensible or well informed.

Price Floors

Sometimes governments intervene to push market prices up instead of down. Price floors have been widely legislated for agricultural products, such as wheat and milk, as a way to support the incomes of farmers. Historically, there were also price floors on such services as trucking and air travel, although these were phased out by the U.S. government in the 1970s. If you have ever worked in a fast-food restaurant, you are likely to have encountered a price floor: governments in the United States and many other countries maintain a lower limit on the hourly wage rate of a worker’s labor—that is, a floor on the price of labor—called the minimum wage.

Just like price ceilings, price floors are intended to help some people but generate predictable and undesirable side effects. Figure 7-3 shows hypothetical supply and demand curves for butter. Left to itself, the market would move to equilibrium at point E, with 10 million pounds of butter bought and sold at a price of $1 per pound.

Without government intervention, the market for butter reaches equilibrium at a price of $1 per pound with 10 million pounds of butter bought and sold.

Now suppose that the government, in order to help dairy farmers, imposes a price floor on butter of $1.20 per pound. Its effects are shown in Figure 7-4, where the line at $1.20 represents the price floor. At a price of $1.20 per pound, producers would want to supply 12 million pounds (point B on the supply curve) but consumers would want to buy only 9 million pounds (point A on the demand curve). So the price floor leads to a persistent surplus of 3 million pounds of butter.

The black horizontal line represents the government-imposed price floor of $1.20 per pound of butter. The quantity of butter demanded falls to 9 million pounds, and the quantity supplied rises to 12 million pounds, generating a persistent surplus of 3 million pounds of butter.

Does a price floor always lead to an unwanted surplus? No. Just as in the case of a price ceiling, the floor may not be binding—that is, it may be irrelevant. If the equilibrium price of butter is $1 per pound but the floor is set at only $0.80, the floor has no effect.

But suppose that a price floor is binding: what happens to the unwanted surplus? The answer depends on government policy. In the case of agricultural price floors, governments buy up unwanted surplus. As a result, the U.S. government has at times found itself warehousing thousands of tons of butter, cheese, and other farm products. The government then has to find a way to dispose of these unwanted goods.

When the government is not prepared to purchase the unwanted surplus, a price floor means that would-be sellers cannot find buyers. This is what happens when there is a price floor on the wage rate paid for an hour of labor, the minimum wage: when the minimum wage is above the equilibrium wage rate, some people who are willing to work—that is, sell labor—cannot find buyers—that is, employers—willing to give them jobs.

PRICE FLOORS AND SCHOOL LUNCHES

When you were in grade school, did your school offer free or very cheap lunches? If so, you were probably a beneficiary of price floors.

Where did all the cheap food come from? During the 1930s, when the U.S. economy was going through the Great Depression, a prolonged economic slump, prices were low and farmers were suffering severely. In an effort to help rural Americans, the U.S. government imposed price floors on a number of agricultural products. The system of agricultural price floors—officially called price support programs—continues to this day. Among the products subject to price support are sugar and various dairy products; at times grains, beef, and pork have also had a minimum price.

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The big problem with any attempt to impose a price floor is that it creates a surplus. To some extent the U.S. Department of Agriculture has tried to head off surpluses by taking steps to reduce supply; for example, by paying farmers not to grow crops. As a last resort, however, the U.S. government has been willing to buy up the surplus, taking the excess supply off the market.

But then what? The government can’t just sell the agricultural products: that would depress market prices, forcing the government to buy the stuff right back. So it has to give it away in ways that don’t depress market prices. One way to do this is by giving surplus food, free, to school lunch programs. These gifts are known as “bonus foods.” Along with financial aid, bonus foods allow many school districts to provide free or very cheap lunches to their students. Is this a story with a happy ending?

Not really. Nutritionists, concerned about growing child obesity in the United States, place part of the blame on those bonus foods. Schools get whatever the government has too much of—and that has tended to include a lot of dairy products, beef, and corn, and not much in the way of fresh vegetables or fruit.

As a result, school lunches that make extensive use of bonus foods tend to be very high in fat and calories. So this is a case in which there is such a thing as a free lunch—but this lunch may be bad for your health.

How a Price Floor Causes Inefficiency

The persistent surplus that results from a price floor creates missed opportunities—inefficiencies—that resemble those created by the shortage that results from a price ceiling.

Inefficiently Low QuantityBecause a price floor raises the price of a good to consumers, it reduces the quantity of that good demanded; because sellers can’t sell more units of a good than buyers are willing to buy, a price floor reduces the quantity of a good bought and sold below the market equilibrium quantity. Notice that this is the same effect as a price ceiling. You might be tempted to think that a price floor and a price ceiling have opposite effects, but both have the effect of reducing the quantity of a good bought and sold.

Inefficient Allocation of Sales Among SellersLike a price ceiling, a price floor can lead to inefficient allocation—but in this case inefficient allocation of sales among sellers rather than inefficient allocation to consumers.

An episode from the Belgian movie Rosetta, a realistic fictional story, illustrates the problem of inefficient allocation of selling opportunities quite well. Like many European countries, Belgium has a high minimum wage, and jobs for young people are scarce. At one point Rosetta, a young woman who is very eager to work, loses her job at a fast-food stand because the owner of the stand replaces her with his son—a very reluctant worker. Rosetta would be willing to work for less money, and with the money he would save, the owner could give his son an allowance and let him do something else. But to hire Rosetta for less than the minimum wage would be illegal.

Wasted ResourcesAlso like a price ceiling, a price floor generates inefficiency by wasting resources. The most graphic examples involve government purchases of the unwanted surpluses of agricultural products caused by price floors. When the surplus production is simply destroyed, and when the stored produce goes, as officials euphemistically put it, “out of condition” and must be thrown away, it is pure waste.

Price floors also lead to wasted time and effort. Consider the minimum wage. Would-be workers who spend many hours searching for jobs, or waiting in line in the hope of getting jobs, play the same role in the case of price floors as hapless individuals searching for apartments in the case of price ceilings.

Inefficiently High QualityAgain like price ceilings, price floors lead to inefficiency in the quality of goods produced.

We’ve seen that when there is a price ceiling, suppliers produce goods that are of inefficiently low quality: buyers prefer higher-quality products and are willing to pay for them, but sellers refuse to improve the quality of their products because the price ceiling prevents their being compensated for doing so. This same logic applies to price floors, but in reverse: suppliers offer goods of inefficiently high quality.

Since airline deregulation in the 1970s, American passengers have seen ticket prices decrease along with the quality of in-flight service.

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How can this be? Isn’t high quality a good thing? Yes, but only if it is worth the cost. Suppose that suppliers spend a lot to make goods of very high quality but that this quality isn’t worth much to consumers, who would rather receive the money spent on that quality in the form of a lower price. This represents a missed opportunity: suppliers and buyers could make a mutually beneficial deal in which buyers got goods of lower quality for a much lower price.

A good example of the inefficiency of excessive quality comes from the days when transatlantic airfares were set artificially high by international treaty. Forbidden to compete for customers by offering lower ticket prices, airlines instead offered expensive services, like lavish in-flight meals that went largely uneaten.

Illegal ActivityFinally, like price ceilings, price floors provide incentives for illegal activity. For example, in countries where the minimum wage is far above the equilibrium wage rate, workers desperate for jobs sometimes agree to work off the books for employers who conceal their employment from the government—or bribe the government inspectors. This practice, known in Europe as “black labor,” is especially common in southern European countries such as Italy and Spain.

So Why Are There Price Floors?

So why do governments impose price floors when they have so many negative side effects? The reasons are similar to those for imposing price ceilings. Government officials often disregard warnings about the consequences of price floors either because they believe that the relevant market is poorly described by the supply and demand model or, more often, because they do not understand the model. Above all, just as price ceilings are often imposed because they benefit some influential buyers of a good, price floors are often imposed because they benefit some influential sellers.

Quantity Controls

In the 1930s, New York City instituted a system of licensing for taxicabs: only taxis with a medallion were allowed to pick up passengers. This licensing system, a form of quantity control also known as a quota, was intended to ensure quality. In the last 60 years the number of medallions has increased by about 16%, to a total of 13,237 medallions, while at the same time the population of New York City has increased by about 60%. The result has been a very high price for a medallion—the price of a medallion in 2012 was about $700,000!

To understand why a New York taxi medallion is worth so much money, we consider a simplified version of the market for taxi rides, shown in Figure 7-5. Just as we assumed in the analysis of rent control that all apartments were the same, we now suppose that all taxi rides are the same—ignoring the real-world complication that some taxi rides are longer, and so more expensive, than others. The table in the figure shows supply and demand schedules. The equilibrium—indicated by point E in the figure and by the shaded entries in the table—is a fare of $5 per ride, $5 per ride, with 10 million rides taken per year.

Without government intervention, the market reaches equilibrium with 10 million rides taken per year at a fare of $5 per ride.

The New York medallion system limits the number of taxis, but each taxi driver can offer as many rides as he or she can manage. (Now you know why New York taxi drivers are so aggressive!) To simplify our analysis, however, we will assume that a medallion system limits the number of taxi rides that can legally be given to 8 million per year.

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Until now, we have derived the demand curve by answering questions of the form: “How many taxi rides will passengers want to take if the price is $5 per ride?” But it is possible to reverse the question and ask instead: “At what price will consumers want to buy 10 million rides per year?” The price at which consumers want to buy a given quantity—in this case, 10 million rides at $5 per ride—is the demand price of that quantity. You can see from the demand schedule in Figure 7-5 that the demand price of 6 million rides is $7 per ride, the demand price of 7 million rides is $6.50 per ride, and so on.

Similarly, the supply curve represents the answer to questions of the form: “How many taxi rides would taxi drivers supply at a price of $5 each?” But we can also reverse this question to ask: “At what price will producers be willing to supply 10 million rides per year?” The price at which producers will supply a given quantity—in this case, 10 million rides at $5 per ride—is the supply price of that quantity. We can see from the supply schedule in Figure 7-5 that the supply price of 6 million rides is $3 per ride, the supply price of 7 million rides is $3.50 per ride, and so on.

Now we are ready to analyze a quota. We have assumed that the city government limits the quantity of taxi rides to 8 million per year. Medallions, each of which carries the right to provide a certain number of taxi rides per year, are made available to selected people in such a way that a total of 8 million rides will be provided. Medallion-holders may then either drive their own taxis or rent their medallions to others for a fee.

Figure 7-6 shows the resulting market for taxi rides, with the black vertical line at 8 million rides per year representing the quota. Because the quantity of rides is limited to 8 million, consumers must be at point A on the demand curve, corresponding to the shaded entry in the demand schedule: the demand price of 8 million rides is $6 per ride. Meanwhile, taxi drivers must be at point B on the supply curve, corresponding to the shaded entry in the supply schedule: the supply price of 8 million rides is $4 per ride.

The table shows the demand price and the supply price corresponding to each quantity: the price at which that quantity would be demanded and supplied, respectively. The city government imposes a quota of 8 million rides by selling enough medallions for only 8 million rides, represented by the black vertical line. The price paid by consumers rises to $6 per ride, the demand price of 8 million rides, shown by point A. The supply price of 8 million rides is only $4 per ride, shown by point B. The difference between these two prices is the quota rent per ride, the earnings that accrue to the owner of a medallion. The quota rent drives a wedge between the demand price and the supply price. Because the quota discourages mutually beneficial transactions, it creates a deadweight loss equal to the shaded triangle.

But how can the price received by taxi drivers be $4 when the price paid by taxi riders is $6? The answer is that in addition to the market in taxi rides, there is also a market in medallions. Medallion-holders may not always want to drive their taxis: they may be ill or on vacation. Those who do not want to drive their own taxis will sell the right to use the medallion to someone else. Since the holder of the medallion is willing to offer a ride for $4 but the consumer is willing to buy a ride for $6, the medallion can be rented for $2 per ride. Whoever holds the medallion can earn $2 per ride so the rental price will be bid up to $2. As for the medallion-holder, she makes $2 whether she rents the medallion or uses it herself.

It is no coincidence that $2 is exactly the difference between $6, the demand price of 8 million rides, and $4, the supply price of 8 million rides. In every case in which the supply of a good is legally restricted, there is a wedge between the demand price of the quantity transacted and the supply price of the quantity transacted. This wedge, illustrated by the double-headed arrow in Figure 7-6, has a special name: the quota rent. It is the earnings that accrue to the medallion-holder from ownership of a valuable commodity, the medallion.

So Figure 7-6 also illustrates the quota rent in the market for New York taxi rides. The quota limits the quantity of rides to 8 million per year, a quantity at which the demand price of $6 exceeds the supply price of $4. The wedge between these two prices, $2, is the quota rent that results from the restrictions placed on the quantity of taxi rides in this market.

In addition to the market for taxi rides, there is also a market in taxi medallions.

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So regardless of whether the medallion owner uses the medallion himself or herself, or rents it to others, it is a valuable asset. And this is represented in the going price for a New York City taxi medallion. Notice, by the way, that quotas—like price ceilings and price floors—don’t always have a real effect. If the quota were set at 12 million rides—that is, above the equilibrium quantity in an unregulated market—it would have no effect because it would not be binding.

The Costs of Quantity Controls

Like price controls, quantity controls can have some predictable and undesirable side effects. The first is the by-now-familiar problem of inefficiency due to missed opportunities: quantity controls prevent mutually beneficial transactions from occurring, transactions that would benefit both buyers and sellers. Looking back at Figure 7-6, you can see that starting at the quota of 8 million rides, New Yorkers would be willing to pay at least $5.50 per ride for an additional 1 million rides and that taxi drivers would be willing to provide those rides as long as they got at least $4.50 per ride. These are rides that would have taken place if there had been no quota.

The same is true for the next 1 million rides: New Yorkers would be willing to pay at least $5 per ride when the quantity of rides is increased from 9 to 10 million, and taxi drivers would be willing to provide those rides as long as they got at least $5 per ride. Again, these rides would have occurred without the quota.

Only when the market has reached the unregulated market equilibrium quantity of 10 million rides are there no “missed-opportunity rides”—the quota of 8 million rides has caused 2 million “missed-opportunity rides.” A buyer would be willing to buy the good at a price that the seller would be willing to accept, but such a transaction does not occur because it is forbidden by the quota.

Economists have a special term for the lost gains from missed opportunities such as these: deadweight loss. Generally, when the demand price exceeds the supply price, there is a deadweight loss. Figure 7-6 illustrates the deadweight loss with a shaded triangle between the demand and supply curves. This triangle represents the missed gains from taxi rides prevented by the quota, a loss that is experienced by both disappointed would-be riders and frustrated would-be drivers.

Because there are transactions that people would like to make but are not allowed to, quantity controls generate an incentive to evade them or even to break the law. New York’s taxi industry again provides clear examples. Taxi regulation applies only to those drivers who are hailed by passengers on the street. A car service that makes prearranged pickups does not need a medallion. As a result, such hired cars provide much of the service that might otherwise be provided by taxis, as in other cities.

In addition, there are substantial numbers of unlicensed cabs that simply defy the law by picking up passengers without a medallion. Because these cabs are illegal, their drivers are completely unregulated, and they generate a disproportionately large share of traffic accidents in New York City.

THE CLAMS OF THE JERSEY SHORE

Clam quotas were introduced in New Jersey to help save a threatened natural resource.

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One industry that New Jersey really dominates is clam fishing. The Garden State typically supplies about 70% of the country’s surf clams, whose tongues are used in fried-clam dinners, and about 90% of the quahogs, which are used to make clam chowder.

In the 1980s, however, excessive fishing threatened to wipe out New Jersey’s clam beds. To save the resource, the U.S. government introduced a clam quota, which sets an overall limit on the number of bushels of clams that may be caught and allocates licenses to owners of fishing boats based on their historical catches.

Notice, by the way, that this is an example of a quota that is probably justified by broader economic and environmental considerations—unlike the New York taxicab quota, which has long since lost any economic rationale. Still, whatever its rationale, the New Jersey clam quota works the same way as any other quota.

MODULE 7 Review

Check Your Understanding

Draw separate graphs to illustrate each of the following and explain each graph.

PITFALLS: CEILINGS, FLOORS, AND QUANTITIES

CEILINGS, FLOORS, AND QUANTITIES

A price ceiling pushes the price of a good down. A price floor pushes the price of a good up. So it looks like we can assume that the effects of a price floor are the opposite of the effects of a price ceiling. Put another way, if a price ceiling reduces the quantity of a good bought and sold, doesn’t a price floor increase the quantity?

No, it doesn’t, because both floors and ceilings reduce the quantity bought and sold. Why? When the quantity of a good supplied isn’t equal to the quantity demanded, the actual quantity sold is determined by the “short side” of the market—whichever quantity is less. If sellers don’t want to sell as much as buyers want to buy, it’s the sellers who determine the actual quantity sold, because buyers can’t force unwilling sellers to sell. If buyers don’t want to buy as much as sellers want to sell, it’s the buyers who determine the actual quantity sold, because sellers can’t force unwilling buyers to buy.

To learn more, see pages 63–70, including Figures 7-2 and 7-4.