What Is A Price Ceiling And Price Floor

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

What is a price ceiling and price floor.

This is usually done to protect buyers and suppliers or manage scarce resources during difficult economic times. Price floors and price ceilings are government imposed minimums and maximums on the price of certain goods or services. 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. A price floor must be higher than the equilibrium price in order to be effective.

A price ceiling is a type of price control usually government mandated that sets the maximum amount a seller can charge for a good or service. Price ceiling has been found to be of great importance in the house rent market. A price floor is a government or group imposed price control or limit on how low a price can be charged for a product good commodity or service. By observation it has been found that lower price floors are ineffective.

The equilibrium price commonly called the market price is the price where economic forces such as supply and demand are balanced and in the absence of external. 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. It has been found that higher price ceilings are ineffective.