Economics Ceiling And Floor

In this video i explain what happens when the government controls market prices.

Economics ceiling and floor.

Price ceilings are a legal maximum price and price floors are a minimum lega. Price ceiling has been found to be of great importance in the house rent market. Price ceiling and price floor definition example graph price regulations definition example. Price floor is typically proposed to ensure good income of people involved in farming agriculture and low skilled jobs.

Price floors and price ceilings are government imposed minimums and maximums on the price of certain goods or services. A price ceiling can increase the economic surplus of consumers as it decreases economic surpluses for the producer. A price ceiling is a legal maximum price but a price floor is a legal minimum price and consequently it would leave room for the price to rise to its equilibrium level. The lower price will result is a shortage of supply and hence decreased sales.

This is usually done to protect buyers and suppliers or manage scarce resources during difficult economic times. In other words a price floor below equilibrium will not be binding and will have no effect. The supposed economic relief of controlled gas prices was also offset by some new expenses. It has been found that higher price ceilings are ineffective.

Price ceiling is a situation when the price charged is more than or less than the equilibrium price determined by market forces of demand and supply.