Question

Provide an example of a price ceiling. Discuss the policy and the impact on the functioning of the market? In general, are price controls good economic policy?

Answer 1

A price ceiling is a phenomenon when the government intervenes in the market and sets a minimum price for selling the goods.

It is generally done to protect the producers because they are not getting sufficient prices of what they have produced.

For example in many countries where government intervenes to protect the farmers because sometimes farmers production are not getting the sufficient price of what they have produced .so government intervenes and fix and price below which goods cant be sold

It is good sometimes and in the short run only because in the long run if it is done then the consumer will decline the consumption of the goods and this will lead to disequilibrium in the market.