Reference no: EM131892305

Assignment: Price Floors and Price Ceilings

For your second assignment, you will be investigating a real life situation in which there is government intervention through price ceilings or price floors. You should identify why the government wanted to intervene (as in, wanted to help workers as with a minimum wage) as well as discussing what the actual effect is in the market according to our model from class. Finally you should think about a way (or two) in which people in the market have attempted to circumvent the law. If you absolutely cannot think of a way, you may instead (or in addition to) write about how the law in this market might affect another market. For instance:

Minimum wage

Stated Goal: Government wants to help workers.

Real effects: CS surplus goes down (hiring firms are worse off), PS is unknown (some gain higher wage, some become unemployed)

Way around law: Employers may hire undocumented workers, employees may be required to pay for a meal at the restaurant where they work each shift they work, etc.

Effect on other market: Minimum wage increase will cause price of Big Macs to go up due to higher labor costs, etc.

You cannot use the minimum wage as your example. I have only outlined the basics of what I expect. You should write your report up in normal prose, with paragraphs and full sentences.

Key points for the assignment:

• Find an example of a Price Floor/Ceiling, NOT A TAX
• Describe the STATED GOAL of the government, as best as you can
• Discuss the real effects, using CS, PS, and TS as we have in class
• Brainstorm a way around the law which people may use

Limit the length of the assignment to 2 pages, double spaced. You may find that you can complete the assignment in a couple paragraphs and less than two pages. That's totally fine, as long as you meet the other criteria.