followed). If the living wage is binding, it will cause an excess supply of labor at that wage rate.

4. Changes in the interest rate (i.e., the price of financial capital) cause a movement along the demand curve.

A change in anything else (non-price variable) that affects demand for financial capital (e.g., changes in

confidence about the future, changes in needs for borrowing) would shift the demand curve.

5. Changes in the interest rate (i.e., the price of financial capital) cause a movement along the supply curve. A

change in anything else that affects the supply of financial capital (a non-price variable) such as income or

future needs would shift the supply curve.

6. If market interest rates stay in their normal range, an interest rate limit of 35% would not be binding. If the

equilibrium interest rate rose above 35%, the interest rate would be capped at that rate, and the quantity of

loans would be lower than the equilibrium quantity, causing a shortage of loans.
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