prices for haircuts and other services. Once determined, these joint decisions have the force of law. Labor unions, through government approved collective bargaining procedures, may be able to establish price floors that are just as effective as ones. In these not other cases, the analysis of the nature and effects of price floors is much different from that of the minimum wage.
Price Ceilings
Price ceilings or maximum prices have been put into effect from time to time in the United States for two primary purposes. They have been established across the board in attempts to hold inflation in check They have also been used on a selective basis to keep the purchase of within reach of those at the lower end of the income certain items scale. This latter purpose may also have an anti-inflationary intent Across-the-board ceiling in the United States have been confined to war-time periods except for the 90-day wage price freeze of August 1971, but selective price ceilings have been used in specific markets at other times. We shall concern ourselves this chapter with selective price ceilings, using as an illustration rent controls Rent controls have been used in metropolitan areas as a device to hold housing costs in cheek for low-inco During the The than 200 U.S. cities enacted some type of rent most well known example of such controls is undoubtedly that of New York City, which has had rent controls in effect since World War II On a much smaller scale, it is common for a university to set rent rates on university apartments at relatively low levels to help alleviate problems encountered by low-income students. Some useful Economic Concepts floors and price ceilings have been enacted in response to specific problems of certain groups of people. Generally, they have been en- acted by legislative groups in good faith and in the expectation that they would help alleviate the problems to which they were addressed Almost invariably, the results have been mixed. The price controls have tended to generate as many problems as they have solved. Why has this been s What has gone wrong? To analyze and assess the impact of price controls, some economic concepts beyond those developed in Chapter 1 are required. These new concepts are (1) market structure, (2) demand, (3) supply, (4) mar-ket price determination, and (5 elasticity of demand. We shall develop these in turn