Usury Laws as Price Ceilings in Financial Markets
How are Usury Laws as Price Ceilings in Financial Markets?
Written by Jason Gordon
Updated at March 27th, 2023
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How are Usury Laws as Price Ceilings in Financial Markets?
Usury Laws act as Price Ceilings in Financial Markets as they prohibit lenders from charging above a stated rate of interest.
The demand and supply model predicts that at the lower price ceiling interest rate, the quantity demanded of credit card debt will increase from its original level; however, the quantity supplied of credit card debt will decrease from the original.
The demand and supply model predicts that at the lower price ceiling interest rate, the quantity demanded of credit card debt will increase from its original level; however, the quantity supplied of credit card debt will decrease from the original.
At the price ceiling, quantity demanded will exceed quantity supplied. Consequently, a number of people who want to have credit cards and are willing to pay the prevailing interest rate will find that companies are unwilling to issue cards to them. The result will be a credit shortage.
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