Economics Ceiling And Floor

A price ceiling is a maximum amount.

Economics ceiling and floor. The opposite of a price ceiling is a price floor. In this video i explain what happens when the government controls market prices. 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.

This is usually done to protect buyers and suppliers or manage scarce resources during difficult economic times. A price ceiling can increase the economic surplus of consumers as it decreases economic surpluses for the producer. Price ceilings are a legal maximum price and price floors are a minimum lega. It has been found that higher price ceilings are ineffective.

The lower price will result is a shortage of supply and hence decreased sales. Price ceiling as well as price floor are both intended to protect certain groups and these protection is only possible at the price of others. Price floor is typically proposed to ensure good income of people involved in farming agriculture and low skilled jobs. Price ceiling has been found to be of great importance in the house rent market.

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.