🔒 🛡️ Micro Ch. 5: Price Controls and Quotas // Meddling with Markets

Price ceiling

A legal maximum on the price sellers can charge for a good or service (ex. rent control)

Price floor

A legal minimum on the price buyers are required to pay for a good or service (ex. minimum wage)

Quotas

Quantity controls; an upper limit on the quantity of some good that can be bought or sold (example: “Voluntary Export Restraint” program in 1981 limited # of cars exported to U.S from Japan)

Binding

Means there is an effect on the market outcome, causing surplus or shortage

Quota rent

Additional revenue earned by those who are allowed to import goods