Economics Ceiling Price And Floor Price

Price floors and price ceilings are government imposed minimums and maximums on the price of certain goods or services.

Economics ceiling price and floor price.

This is usually done to protect buyers and suppliers or manage scarce resources during difficult economic times. Like price ceiling price floor is also a measure of price control imposed by the government. Price ceiling has been found to be of great importance in the house rent market. 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.

Price floors and ceilings are inherently inefficient and lead to sub optimal consumer and producer surpluses but. It is legal minimum price set by the government on particular goods and services in order to prevent producers from being paid very less price. A price ceiling is the legal maximum price for a good or service while a price floor is the legal minimum price. In general price ceilings contradict the free enterprise capitalist economic culture of the united states.

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 price floor definition in economics is the minimum price allowed for a particular good or service. In other words a price floor below equilibrium will not be binding and will have no effect. But this is a control or limit on how low a price can be charged for any commodity.