MT445 DB2

One method of government interventions in markets is through price controls. The government intervenes to regulate prices by imposing price controls, which are legal restrictions on how high or low a market price may go. Price ceiling is the maximum price sellers are allowed to charge for a good or service. Price floor is the minimum price buyers are required to pay for a good or service.

Higher education has become increasingly expensive and hence education now costs much more than it did before. One of the ways the government controls prices is by setting a floor or a ceiling on the market.  Explain what might happen in the market for higher education if the government placed a price ceiling on the cost of one undergraduate credit hour. Explain your answers using economic theory on impacts of price ceiling on market equilibrium.

Discussion Checklist:

A. What are the impacts of pricing ceiling market equilibrium in education market? B. Does it matter whether or not the ceiling is set above or below the equilibrium price? C. Who might benefit from this price restriction? Who might be harmed from this price restriction?