Archive forprice ceiling or floor

Rent Freezing in New York City

Rent control is a price ceiling on rental housing. There are many drawbacks to rent control: shortages caused by price being below marginal profit, reduces quality of homes, increases the cost in homes, etc. For the second year in a row, New York City is experiencing rent freeze, meaning that landlords cannot raise the rent for tenants of apartment buildings. On June 27, 2016, the board set rents for over one million rent-stable homes in the city. This was enacted in order to stabilize the price of homes in New York which have been on a constant rise since the demand for housing is so high. The board increased 2-year leases by 2%, causing tenants to be aggravated at the price increase of their homes. While tenants were unhappy, landlords were as well, feeling that the increase was too low. The article illustrates how tenants are unhappy with the short-term effects of the price increase, but in the long run will cause more stability in the housing market.

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The pollution in Delhi dued to burn-off of rice stubbles

The pollution in Delhi primarily is caused by the smoke from the burning of rice stubble in surrounding farmland and the traffic pollution. The annual average PM 2.5 in Delhi doubles annual average in Beijing. The negative externality of rice and car production will be the pollution in air.

However, due to government’s dread of stopping farmers from burning off stubbles left from rice production. India is the second place in producing rice while Uttar Pradesh, a state which Delhi is in, is the second place in the country. Government’s liability on rice production explains why it doesn’t want farmers to be alienate.

The fear of shortage in food supply neither help cut the rice production but even encourage it which may trigger more burn-off pollution. Government encourages growing by offering floor prices and subsidies. According to what we learned about subsidies and floor price, there is such a nice market condition for rice production which has a large negative externality in polluting.



N.F.L. Agrees to Stop Calling for Price Floor on Resold Tickets

The N.F.L. has agreed to remove its price floor on tickets sold on the secondary market through the NFL’s online exchange, reaching a settlement with five states and Washington, D.C., ending a two-year antitrust investigation into allegedly unlawful ticket resale practices. The investigation explored whether the league’s ticket pricing practices, including applying a price floor on tickets sold on league websites, violated antitrust laws. The price floor was set because the league blamed resellers for declines in attendance because reselling of cheap tickets online makes it more difficult to sell full-price tickets at the box office. However, under the NFL’s price floor scheme, fans were forced to pay inflated prices for even the least desirable NFL games, which put fans at a disadvantage.

As a result, the NFL will discontinue a league policy that had required all 32 teams to ban tickets being resold on Ticketmaster and similar websites for less than face value, set at the price floor.  While the NFL agreed not to force teams to impose a price floor, the settlement allows for them to privately set one for their team. In addition, the league cannot encourage teams to use technology making it more difficult for buyers to purchase tickets from other online vendors, leaving it to the teams to stop ticket fraud.

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PetroChina Fall After Government Creates $40 Oil Floor

At the beginning of 2016, Bloomberg posted an article describing how one of China’s biggest refiners fell after a policy that would not let fuel prices fall in line with crude prices below $40/barrel. This caused Asia’s biggest refiner, Sinopec to fall 4.9%. The price of fuels won’t be adjusted as long as crude is under $40 a barrel and the profits from fuels sales below the $40 level will go to a fund to promote energy conservation and security, while also improving fuel quality. The reason for this price floor was to help lower vehicle pollution.

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Indonesian Airline Price Floors

After years of Indonesian Airlines suffering from various accidents, the Jakarta Post came out with an article describing the Indonesian government’s recent debate to change price floors within their airline industries. But what do price floors have to do with the safety of Indonesian Airlines?

By installing price floors, governments make it illegal for products to be sold underneath the regulations. Price floors would create competition between airlines to offer passengers the best quality; by creating price floors within their airline system, Indonesia could be insuring safer and high quality carriers, resulting in less accidents. The current floor calls that airline fees must be within 40% of the already established price ceiling, but the CEO of Air Asia is calling for a 30% reduction of that minimum price.

Some Indonesian economists still argue that accidents will continue to occur despite the price floor, and that more extensive measures must be taken. But whether safety is completely insured or not, the floors would still prevent “predatory pricing” from the lower-end airlines. Regulating prices doesn’t always result in killing healthy competition, but the industry will continue to make their argument until the government makes a final decision.


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China Removes Price Ceilings from Most Drugs

Since the year 2000, the Chinese government has implemented a price ceiling on most drugs after many complaints from Chinese consumers about prices being too high. Recently, however, the government has decided to eliminate the price ceiling to allow the price to be set by a market-driven pricing system. This is done to encourage more competition and better medicine as a whole for the pharmaceutical industry. The government will instead conduct drug inspections, focusing on where competition is lacking to regulate prices. They do not expect there to be any significant changes in drug prices, because most of the medicine impacted is sold through hospitals regulated by more local government.

Because the market is still being regulated so heavily, it is unlikely that removing the price ceiling on most medicine will impact the economy in any serious way. The point of the price ceiling is to keep the medicine costs from becoming too high, but since it has been in check for a decade and a half, there is some room to let the market fluctuate and create competition. The Chinese government is loosening its grip on different sectors of its market in a safe way. By having local government and continued lax regulation on medicine, the market price should even out to increase competition without becoming so expensive that the demand shoots down.


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The price ceiling for poor

The article talks about Whole Food Market sets up a rice ceiling for the poor people. Although it attracts more people and seems increase the demand, it is not economic profitable for those poor people. It is because these people will spend too much time on waiting to get cheap stuffs, but they can use these time to do other things. There will be a loss of the resources. It really happened and we can see from the article: the parking lot is full of people who are waiting for the cheap goods. The market cannot work efficiently because the price ceiling will create the dead weight loss. Although the price ceiling aims well and is good for the consumers, it is not a good choice for the economy reaching the maximum profit. From the economists and the producers’ view, price ceiling is not a good thing because it will economic inefficiency and the producers can not get their maximum benefits. However, from the producers and governors’ view, price ceiling is great because it lowers price and more people can afford the goods.


The Disadvantage of Price Control

(The link has to be open in a new tab page when you double click the picture. I am sorry about that.)

Markets are usually a good way to organize economic activity. So economists often disagree with the price ceiling and price flooring to control the market. The price is not the random outcome. The price is decided by the “invisible hand” that is made of every consumers and suppliers.

If the government intervenes the markets, they will break the market’s balance. Price control is propose of helping poor people. But Venezuelan government makes the bigger trouble. Government wants to control the inflation and they set the price very low. The commodity like brush, tower, tissue, shampoo and so on are quite cheap to help poor people. However, the price is so low that company and producer cannot get the revenue in the markets. So, farmers plant less grains. Companies cut down the production. The suppliers even store the good deliberately and cause the shortage so they can increase the revenue.

Price control decrease the revenue of people who it meant to help. Government actually can use different way to help those in need other than price controlling. Such as subsides and so on.

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OPEC Deals and Oil Prices

At the intersection of political policy and economics lies the crude oil market. As economics students we are aware that alterations in either the supply or demand curve shifts the equilibrium quantity or price. As outlined by the Wall Street Journal, a deal between a Saudi royal and rival Iran sparked an upward surge in U.S crude oil prices as barrels traded for over $50 for the first time since late June. The agreement slashed 1% to 2% of  the 33.2 million barrels a day production from OPEC’s 14-nation cartel. This the first time in eight years that OPEC has agreed to limit output on crude oil. The limit in supply shifts the supply curve upward as seller require a higher price for crude oil at the same quantity. With some exceptions, the demand curve remains unchanged as we observe the large price surge.

The crude oil market is greatly impacted by the political stance of OPEC as seen in the graphic below. Due to the fact that OPEC controls a large percentage of the overseas crude oil supply, and alteration in the exportation of crude oil has a great impact on price.