Writing assignment: The Consequences of Price Ceilings

    Step 1: Read the following selections on price controls and rent controls:

        "Two sides of a coin; the landords" <http://faculty.oxy.edu/whitney/xaccess/ec101/rent__lat_2007_0114_l.htm>
        "Two sides of a coin; the tenants" <http://faculty.oxy.edu/whitney/xaccess/ec101/rent__lat_2007_0114_t.htm>

    Step 2: Write a brief paper (no more than three pages long, double-spaced with standard fonts and margins) in which you do two things:
    2a: Consider your favorite hobby (listed on the information card you turned in the first day of class), and carefully explain a supply and demand diagram which illustrates the impact of a price ceiling on some key item your hobby requires. Draw the diagram on a separate page (it doesn't count as part of the three-page limit) and refer to the diagram in your description. Use specific numbers (again, hypothetical numbers are fine) on your horizontal and vertical axes which you can refer to in your write-up in order to make your description more concrete. Explain the following effects and use the numbers from your diagram to provide quantitative values for each effect: (1) the economic shortage caused by the price ceiling; and the impact of the price ceiling on (2) consumer surplus (3) producer surplus; and (4) the (minimum) amount of inefficiency (welfare loss).
    2b: Discuss some of the expected real-world consequences of rent controls described in the readings, and describe similar effects that might show up in your "hobby market" or explain why they wouldn't be likely to show up. There are too many consequences for you to include them all, so just focus on some of the consequences that seem especially clear or important to you.

Please keep the following points in mind:
  --Consider your audience to be your classmates--intelligent readers who are just becoming familiar with markets and with supply and demand analysis. Try to make your paper clear and thorough so your intended audience can understand your analysis.
  --Notice that you are not expected to take an overall position for or against price controls in this paper. You just have to carefully explain some of the expected consequences.
  --I will grade your paper on the quality of your analysis, how specific your support is, and the effectiveness with which you communicate your ideas. Be concrete, clear and concise. Stay within the three-page limit, but present your work as a conventional paper, including both an introduction and a conclusion.

Supplementary resource: The economic effects of price controls worksheet