Changes

When a price control causes a difference between the supply quantity and the demand quantity, it is the lower quantity that becomes the market.  The market can never be more than the lesser of the quantity in supply or quantity in demand.  Because the quantity supplied is much less than the quantity demanded, a shortage results.

When a price control causes a difference between the supply quantity and the demand quantity, it is the lower quantity that becomes the market.  The market can never be more than the lesser of the quantity in supply or quantity in demand.  Because the quantity supplied is much less than the quantity demanded, a shortage results.

Rent control in New York City is an example of a price control that has terrible effects.  The people lucky enough to be a rent controlled apartment pay much less than the market rate, and never move out.  New housing is not created as quickly as it should be, because landlords are not sure they will be able to charge the market rate.  Earlier this year one commentator said this about New York City's rent control:<ref>[http://meganmcardle.theatlantic.com/archives/2009/02/out_of_control.php Megan McArdle, ''The Atlantic'']</ref> 

Rent control in New York City is an example of a price control that has terrible effects.  The people lucky enough to be a rent controlled apartment pay much less than the market rate, and never move out.  New housing is not created as quickly as it should be, because landlords are not sure they will be able to charge the market rate.  Nearly every economist, liberal or conservative, agrees that rent control is harmful.

 

:[H]ere's one of the things that basically [every economist], left to right, agrees on:  rent control is the surest way to destroy a city's housing stock short of aerial bombing, and one of the major culprits behind New York's painfully low vacancy rate.  Rent control allows some people to stay in artificially cheap apartments, but only by forcing the people who would have rented them into some other, less desirable place.  Those people bid up the price of the uncontrolled housing, so that you essentially end up with two housing markets, one with rents above the natural market price, and one with rents below it.  There is no way to ensure that the deserving middle class folks you want to see stay in the city end up in the latter, and indeed, many of the owners of rent stabilized apartments were notorious for finding the richest tenants they could.  Rich tenants rarely get behind on the rent, and move sooner than people who can just barely afford their below-market place. ...  And no one wants to build any new housing except luxury units which will not be controlled.  Then everyone wonders how come there are no houses for middle income people in [New York City].

== Minimum Wage ==

== Minimum Wage ==

Today, the government prohibits employers from paying wages below a certain amount per hour, called the “minimum wage.”  As of July 24, 2009, the minimum wage rate in New Jersey and nationwide is $7.25 per hour (in some states it is higher).<ref>For a history of the national minimum wage, see http://www.dol.gov/esa/minwage/coverage.htm</ref> If you work 40 hours a week for 50 weeks, or a total of 2000 hours, then that translates to a yearly salary of $14,500.  It is difficult to support a family on that small amount in some areas of the country, and many politicians are constantly demanding an increase in the minimum wage.

Today, the government prohibits employers from paying wages below a certain amount per hour, called the “minimum wage.”  As of July 24, 2009, the minimum wage rate in New Jersey and nationwide is $7.25 per hour (in some states it is higher).  If you work 40 hours a week for 50 weeks, or a total of 2000 hours, then that translates to a yearly salary of $14,500.  It is difficult to support a family on that small amount in some areas of the country, and many politicians are constantly demanding an increase in the minimum wage.

Unfortunately, it is even more difficult to support oneself without a job at all, which is what happens to many people (particularly teenagers) when the minimum wage is increased.  Employers who would hire someone to work at $5 per hour might not be able to hire them at $7.25 per hour.  Isn’t a job at $5 an hour better than no job at all?

Unfortunately, it is even more difficult to support oneself without a job at all, which is what happens to many people (particularly teenagers) when the minimum wage is increased.  Employers who would hire someone to work at $5 per hour might not be able to hire them at $7.25 per hour.  Isn’t a job at $5 an hour better than no job at all?

The more education that someone has, the higher their average income is.  Studies show that going to a four-year college increases the lifetime income of an average person by about $500,000.  Students who complete four-year colleges make more money on average than students who completely only two-year colleges.  Students who complete two-year colleges likewise have higher average incomes than students who end their education after high school.

The more education that someone has, the higher their average income is.  Studies show that going to a four-year college increases the lifetime income of an average person by about $500,000.  Students who complete four-year colleges make more money on average than students who completely only two-year colleges.  Students who complete two-year colleges likewise have higher average incomes than students who end their education after high school.

Raising the minimum wage entices students to take advantage of a "short-term" benefit of the higher wage, but they are worse off in the "long-run" over the time period of their entire lives.  They would make more money over their lifetimes by staying in school and not being enticed by the increase in the minimum wage.

Increasing the minimum wage entices students to take advantage of a "short-term" benefit of the higher wage, but they are worse off in the "long-run" over the time period of their entire lives.

==Price Discrimination==

==Price Discrimination==

There are laws against price discrimination, but most sellers find clever ways to do it anyway.  Airlines have distinguished between business customers and tourists by its “Saturday night stay-over” rule, or by changing the price depending on how far in advance the purchase is made (tourists can buy further in advance than businessmen can).  If the traveler reserves the return flight to include staying over at least one Saturday night, or if he buys months in advance, then he is likely a tourist.  If he flies out and back in the same week without staying through the weekend, or if he buys his ticket only a week before take-off, then he is likely a businessman.  So the airline tickets have been priced much more cheaply for those who stay over at least one Saturday night or purchase a long time in advance.

There are laws against price discrimination, but most sellers find clever ways to do it anyway.  Airlines have distinguished between business customers and tourists by its “Saturday night stay-over” rule, or by changing the price depending on how far in advance the purchase is made (tourists can buy further in advance than businessmen can).  If the traveler reserves the return flight to include staying over at least one Saturday night, or if he buys months in advance, then he is likely a tourist.  If he flies out and back in the same week without staying through the weekend, or if he buys his ticket only a week before take-off, then he is likely a businessman.  So the airline tickets have been priced much more cheaply for those who stay over at least one Saturday night or purchase a long time in advance.

In general, price discrimination depends on the existence of obstacles to prevent buyers from reselling their goods to other buyers.  If the same good is sold at $X to person A and $Y to person B, and X<Y, then person A could buy an extra good and sell it to person B at less than $Y.  The price discrimination would collapse due to the resale market.

In general, price discrimination depends on the existence of obstacles to prevent buyers from reselling their goods to other buyers.  If the same good is sold at $X to person A and $Y to person B, and X<Y, then person A could buy an extra good and sell it to person B at less than $Y.  The price discrimination would collapse due to the resale market. Price discrimination only works when the goods cannot be resold, as in a tailored suit or dress, or an airline ticket that limits use to the person whose name is on the ticket.

 

But some goods cannot be resold.  Goods that are personal to the buyer, like a tailored suit or dress, cannot be resold.  Airline tickets cannot be resold either, so the price discrimination works.  Price discrimination works fine for personalized goods or exclusive markets, because there is not a resale market to eliminate the discrimination.

==Assignment==

==Assignment==