Economics 41105 www.msu.edumilewsk6

1
Economics 4/11/05 www.msu.edu/milewsk6

• OBJECTIVE Exam how governments can distort
  market outcomes by using price controls.
• I. Journal28 pt.A
• Read Business Week Newsclip p.156
• Answer questions (1-3) p.156
• II. Journal28 pt.B
• -notes on distorting market outcomes
• III. Homework Due Friday 4/15/05
• 1.) Read Chapter 6 section 3 p.150-155
• -Answer questions (3-6) p.155.
• 2.) Chapter6 Review
• Chapter6 Test Friday 4/15/05

2
The Week Ahead

• Today 4/11/05 Journal28
• Tuesday 4/12/05
• -MEAP Science 747-946AM
• -Hours (3,4,1,2) 951AM-225PM
• Wednesday 4/13/05
• -MEAP Social Studies 747-946AM
• -Hours (3,4,5,6) 951AM-225PM
• Thursday 4/14/05
• -MEAP Reading 747-946AM
• -Hours (1,2,5,6) 951AM-225PM
• -Parent Teacher Conferences (6-9PM)
• Friday 4/15/05
• -Homework Due
• -Chapter6 Test

3
Economic goals

• The seven broad economic and social goals we
  examined in Chapter 2 often conflict with each
  other. This is why the government has been
  playing a larger role in the economy than someone
  like Adam Smith would have liked.
• One way the government tries to achieve equity
  and security is by setting prices at socially
  desirable levels.
• What does socially desirable mean?

4
Distorting Market Outcomes

• Price ceiling a maximum legal price that can be
  charged for a product.
• Price ceilings can be found in places like NYC
  who put rent controls on housing in an attempt to
  make it affordable.
• Price floor the lowest legal price that can be
  paid for a good or service.
• Minimum wage the lowest legal wage that can be
  paid to most workers is an example of a price
  floor.

5
Rent control

• For example, without rent controls the
  equilibrium price for housing in NYC might be
  900 per month. At this price, suppliers would
  be willing to provide 2 million units of housing.
• REMINDERS
• Law of Demand as price drops quantity demanded
  increases.
• Law of Supply as price drops quantity supplied
  decreases.
• If NYC were to put a price ceiling of 600 per
  month on rent, what would happen to quantity
  demanded? What about quantity supplied?
• What is it called when quantity demanded exceeds
  quantity supplied?

6
Rent control in NYC
7
Federal Minimum Wage
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Economics 4/12/05 www.msu.edu/milewsk6

• OBJECTIVE Review for Chapter6 Test -Prices.
• I. Standard Deviants
• -film on demand supply
• II. Chapter6 Review
• III. Homework Due Friday 4/15/05
• 1.) Read Chapter 6 section 3 p.150-155
• -Answer questions (3-6) p.155.
• 2.) Chapter6 Review
• Chapter6 Test Friday 4/15/05

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Economics 4/13 4/14/05 www.msu.edu/milewsk6

• OBJECTIVE Review for Chapter6 Test -Prices.
• I. Mindjogger
• -video quiz on Chapter6
• II. Chapter6 Review
• III. Homework Due Friday 4/15/05
• 1.) Read Chapter 6 section 3 p.150-155
• -Answer questions (3-6) p.155.
• 2.) Chapter6 Review
• Parent Teacher Conferences Thursday 6-9PM
• Chapter6 Test Friday 4/15/05

10
Economics 4/15/05 www.msu.edu/milewsk6

• OBJECTIVE Demonstrate mastery of Chapter6
  Prices and Decision Making.
• I. Chapter6 Test
• -Prices Decision Making
• II. Journal29 Michigans Top 50
• 1.) Why are Dominos Pizza and Borg-Warner on
  the Detroit Free Press list of the top 50
  Michigans public companies for the first time
  this year?
• 2.) What has been the key to these two companies
  successes?
• 3.) How many companies in the Michigan Top 50
  are automotive manufactures and automotive
  suppliers? Who are they?
• 4.) How many companies in the Top 50 are
  furniture manufacturers? Who are they?