Question

Give a real life example of a:
a. Price ceiling
b. Price floor
c. Quantity ceiling
d. Quantity floor

Answer 1

A) price ceiling is when a maximum limit is set on the price by the government, when it feels that the current equilibrium price is much higher for certain goods, then a cap is placed on the prices.

For example, maximum price is set for certain drugs

B) price floor, like minimum support price ( MSP) set for crops by govt

A minimum price is set for a particular good, for example if the current equilibrium price is less than optimal , like for crops,so govt sets a minimum price

C) quantity ceiling is like imports Quota, a maximum limit on quantity is set,

D) quantity floor, a minimum amount of certain products should be set, like minimum number of trains, flights per day is set for commuting between two places , so that passengers need not to worry