LESSON 5 WHAT HAPPENS WHEN MARKETS ARE NOT IN EQUILIBRIUM?

5-1

HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY

Price Ceiling

Market-clearing price

Legal price ceiling set below market price

Pri

ce

Quantity

D

S

Qs Qd

LESSON 5 WHAT HAPPENS WHEN MARKETS ARE NOT IN EQUILIBRIUM?

5-2

HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY

Price Floor

Market-clearing price

Legal price floor set above market price

Pri

ce

Quantity

Qd Qs

D

S

LESSON 5 WHAT HAPPENS WHEN MARKETS ARE NOT IN EQUILIBRIUM?

5-3

HIGH SCHOOL ECONOMICS 3RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY

Class Activity

• Minimum wage• Agriculture price

minimums• Rent control• “Usury” laws on

credit card loans, setting maximum interest rates

• Price controls on gasoline in the 1970s

Instructions:• Decide whether each

is a price floor or price ceiling.

• Decide whether consumers or producers would favor the control.

• Produce a market graph illustrating the result of this price control.