Price Ceilings and Price Floors · seed 1 · A4, ink-friendly. The answer key prints on its own page for grown-ups.

When price controls open a gap

Civics & Economics · Economics · ages 15-16
Name ______________________   Date ____________

  1. In the competitive labour model, with downward-sloping demand and upward-sloping supply, a minimum wage is set above equilibrium. What appears?

    • A shortage of workers
    • Instant equilibrium
    • A surplus of labour

  2. In the competitive rental model, a city caps rent below equilibrium. What appears?

    • A shortage
    • A surplus, with empty flats piling up
    • Equilibrium, with no pressure to move

  3. In the competitive model with other influences fixed, a rent ceiling above equilibrium has no effect on the equilibrium price.

    Circle one:   True   False

  4. Two competitive markets have the same initial equilibrium price and quantity and the same binding price ceiling. Why is the shortage wider if both curves are more elastic over the price cut?

    • Quantities respond more
    • Elastic markets ignore prices entirely
    • Elasticity bans all price controls

  5. A rent-control report interviews only landlords and current tenants. Which affected group is missing?

    • Landlords who earn less
    • Tenants who keep cheap flats
    • Applicants without flats

  6. In the standard competitive model, price is above equilibrium with no control in place. What do you see?

    • Queues of buyers
    • Unsold goods piling as surplus
    • A market with no pressure at all

  7. Two competitive rental markets have the same initial equilibrium price and quantity, the same demand curve and identical rent caps 10% below equilibrium. Supply is more elastic in city B throughout that price cut. What follows?

    • Both cities see identical shortages
    • City B has a larger shortage
    • City B sees no shortage at all

  8. After a binding rent cap, some tenants pay less, some applicants cannot find flats, and some landlords cut upkeep. A mayor says all renters benefit. What does this overlook?

    • Gains, lost access and upkeep
    • No tenant keeps any flat
    • Landlords earn more than before
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Answer key

For grown-ups. Fold this page away before handing over the rest.

When price controls open a gap W1-mt_ycfT-gkRVy-s1

  1. A surplus of labour · Above equilibrium, quantity supplied beats quantity demanded: a surplus.
  2. A shortage · Below equilibrium, quantity demanded beats quantity supplied: a shortage.
  3. True · It never bites, since the market already sits below the cap.
  4. Quantities respond more · For the same price cut from the same starting point, demand rises more and supply falls more.
  5. Applicants without flats · People unable to obtain a flat are neither current tenants nor landlords, so this sample misses them.
  6. Unsold goods piling as surplus · Above the crossing, sellers offer more than buyers take.
  7. City B has a larger shortage · With the other quantities and price change matched, the more elastic supply in B falls further.
  8. Gains, lost access and upkeep · The stated case includes lower rents for some, lost access for others and reduced maintenance.
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