Chapter 6: Supply, Demand, and Government Policies

Chapter six seems interesting but difficult as well. The beginning of the chapter talks about control and prices and explains the terms price ceiling and price floor. One being the legal maximum a firm can charge for a good or service and the other being the legal minimum a firm can charge for a good or service in that order. Moreover, the chapter discusses how another type of price control, rent control, can lead to the dwindling of a real estate owner's rent cost. Once the price ceiling is under the owner's expectation, he or she may care less about the property. It also focuses on trends, for example, if the equilibrium price is above the price floor, then the price flooring is not binding. However, if the equilibrium price is below the price floor, then the price flooring is binding. Following, it states how evaluating price controls is aimed to help the poor but does more damage than actually benefiting them. Markets are good ways to organize economic activity. But, economist dislike the establishment of ceiling and floor prices.