Chp. 6

Chapter 6 was about the effect on markets due to goverment policies such as imposing price floors and/or price ceilings. A price floor/ceiling can go either of two ways; binding and non-binding. If there is a price ceiling it's all good (non-bindning) until equilibrium price is above the price ceiling. This case would result in quantity demanded exceeding quantity supplied (a.k.a shortage). When it comes to a price floor, the market will do just fine as long as  is not below the the price floor. If it is then the quantity supplied exceeds the quantity demanded (a.k.a surplus).  I found it rather funny how everytime a solution is though up it's always knocked down by some other factor. In the case of price ceilings, price ceilings are motivated by the desire to help buyers of ice cream but not all buyers will benefit. When it comes to housing, price ceilings are imposed to make rent more affordable to some but will end up in landlords not feeling the need to keep the apartments decent enough to live in. As one economist,full of rainbows and sunshine, put it "rent control is the best way to destroy a city, other than bombing". Then there is earned income tax. It sounds like a nice and dandy solution since it helps supplement the income of low-wage workers but then you realize that because this is more goverment spending than that means taxes will increase which sucks because it techinacally makes business less profitable and discourages market activity.