Starting Point: Teaching and Learning Economics > Teaching Methods > Context-Rich Problems > Examples > Price Ceiling: Context Rich Problem

# Price Ceiling: Context Rich Problem

This material is replicated on a number of sites as part of the SERC Pedagogic Service Project

#### Summary

In this context rich problem, students are asked to analyze the effects of a price ceiling.

## Learning Goals

price ceiling, excess demand/shortage

## Context for Use

This context rich problem is to be used in principles of microeconomics and is an excellent way to introduce students to context rich problems. It is a fairly simple problem that helps students get used to creating a written response and graph with their answer. The problem would best work as a take-home assignment, but could be modified to use as an in-class example by not requiring a "one page" response.

## Description and Teaching Materials

Your uncle is very upset because after a recent snow storm he was charged \$300 by a private snow-removal company to clear his driveway. He wants to petition the local village government to pass a law to put a cap on how much firms can charge for clearing driveways. As a student of economics, your uncle asks your advice on the wording of his petition. Provide a one-page report, possibly with a graph, that your uncle can submit to the local village government.

Snow Removal Context Rich Problem (Microsoft Word 24kB Mar31 09)

## Teaching Notes and Tips

This problem is best used right after the introduction of demand and supply. Students will assume that the equilibrium price is \$300 and a "cap" would be an effective price ceiling. It is not a difficult problem, but a good way to introduce context rich problems to the student.

## Assessment

Students should recognize that a "price cap" might cause a shortage and the uncle might have difficulty getting his driveway plowed next time. Students should provide a graph of the concept as well.