Principles of Economics: Microeconomics - How Price Ceilings Create Shortages and Lower Quality

Price ceilings result in five major unintended consequences, and in this video we cover two of them. Using the supply and demand curve, we show how price ceilings lead to a shortage of goods and to low quality goods. Prices are signals that indicate to suppliers how much is being demanded, but when prices are kept artificially low with price ceilings, suppliers have no way of knowing how many goods they should produce and sell, leading to a shortage of goods. Quality also decreases under price controls. Do you ever wonder why the quality of customer service at Starbucks is generally better than at the DMV? The answer lies in incentives and price ceilings. We’ll discuss further in this video.  Try our price ceilings interactive practice: https://mru.io/kcx Microeconomics Course: https://mru.io/11s Next video: https://mru.io/aus Help us caption & translate this video! http://amara.org/v/GLJ6/ 00:00 Why it's important to understand price ceiling & floor effects 00:50 Price ceilings' effects 01:34 Price ceilings create shortages 03:16 Reductions in quality 04:04 The great matzo ball debate 04:34 Sellers have less incentive to give good service 05:59 Conclusion