Shortages and Surpluses
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What students do
- Diagnose a housing shortage caused by a rent-control price ceiling set below equilibrium
- Trace why a minimum-wage price floor set above equilibrium produces a labor surplus
- Distinguish a binding price control from a non-binding one by comparing it to the equilibrium price
- Calculate the size of a shortage or surplus by reading quantity demanded and quantity supplied off a chart
What it covers
- Why a price ceiling only causes a shortage when it is set below equilibrium, using rent control as the example
- Why a price floor only causes a surplus when it is set above equilibrium, using the minimum wage as the example
- Why those gaps do not fix themselves once the price is frozen by law
Learning targets
- Define a SHORTAGE (quantity demanded is greater than quantity supplied) and a SURPLUS (quantity supplied is greater than quantity demanded), and tell them apart
- Explain why a binding PRICE CEILING set BELOW equilibrium causes a persistent SHORTAGE, using rent control as the worked example
- Explain why a binding PRICE FLOOR set ABOVE equilibrium causes a persistent SURPLUS, using the minimum wage as the worked example
- Read a supply-and-demand chart to measure the gap between quantity demanded and quantity supplied, and predict whether a price control creates a shortage or a surplus
From one teacher to another
Almost every kid in the room has heard an adult argue about rent control or the minimum wage at the dinner table, and almost none of them have heard the economist's pushback to either one. I run the exact same shortage-or-surplus test on both price controls, a ceiling below equilibrium and a floor above it, so students see it's one idea wearing two different headlines. The piece most classes skip is binding versus non-binding, so I built a whole slide around when a price ceiling or floor actually changes anything, because that's the detail that makes the rest of the chart make sense.
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