MICROECONOMICS PRINCIPLES WITH ETHICS

MODULE 19: Government Policies - Price Ceilings / Price Gouging

Textbook Reading:

Presentation Slides:

Additional Useful Information:

Price Ceilings
This Wiki page covers some details about price ceilings.

Berlin’s Rent Controls Are Proving to Be the Disaster We Feared
This Bloomberg article offers some data about the effects of new rent control legislation in Berlin, Germany.

Economically Sound, Ethically Dubious
This article discusses the pros and cons of price gouging laws in the aftermath of Hurricane Sandy in 2017.

They Clapped: Can Price-Gouging Laws Prohibit Scarcity?
This article by Michael Munger discusses the enforcement of a North Carolina price-gouging law in the aftermath of a hurricane.

Martin Shkreli Is Big Pharmacy’s Biggest A**hole
This Daily Beast article highlights the reaction to a pharmaceutical company raising the price of a drug from $13.50 to $750 per pill.

OVERVIEW

In this module we consider the effects of the government policy of a price ceiling, i.e., a maximum price that can be charged in the market for a product. These are generally used as an attempt to guarantee supply of a necessary product at an affordable price. It is shown how these policies result in economic inefficiencies by causing more burdens for some people while generating little of the intended positive effect. A case study of US State price gouging laws is used to highlight the pros and cons of the policy.

VIDEO LECTURE

Introduction to Government Price Controls - 10 minutes

Effects of a Price Ceiling - 33 minutes

Effects of Price Gouging Laws - 40 minutes