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.

FIGURE 4.8 Credit Card Interest Rates: Another Price Ceiling Example The original intersection of demand D and
supply S occurs at equilibrium E0. However, a price ceiling is set at the interest rate Rc, below the equilibrium
interest rate R0, and so the interest rate cannot adjust upward to the equilibrium. At the price ceiling, the quantity
demanded, Qd, exceeds the quantity supplied, Qs. There is excess demand, also called a shortage.
102 4 • Labor and Financial Markets

Many states do have usury laws, which impose an upper limit on the interest rate that lenders can charge.

However, in many cases these upper limits are well above the market interest rate. For example, if the interest
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