one bank account and another. Yet we can analyze these flows of funds with the same tools of demand and

supply as markets for goods or labor.

Price Ceilings in Financial Markets: Usury Laws

As we noted earlier, about 200 million Americans own credit cards, and their interest payments and fees total

tens of billions of dollars each year. It is little wonder that political pressures sometimes arise for setting limits

on the interest rates or fees that credit card companies charge. The firms that issue credit cards, including

banks, oil companies, phone companies, and retail stores, respond that the higher interest rates are necessary

to cover the losses created by those who borrow on their credit cards and who do not repay on time or at all.

These companies also point out that cardholders can avoid paying interest if they pay their bills on time.

Consider the credit card market as Figure 4.8 illustrates. In this financial market, the vertical axis shows the
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