Question

price floor amd price ceilings leads

price floor amd price ceilings leads

Homework Answers

Answer #1

Price floor is setting the minimum price of a good above the equilibrium price which makes the good costly as a result of which the quantity supplied is more than the quantity demanded at that price which leads to surplus in the market.

On the other hand, price ceiling refers to fixing the maximum price of a product below the equilibrium price when the equilibrium price is very high in the market in order to protect the interest of consumers. So, the quantity demanded is more than the quantity supplied at this price which leads to a shortage in the market.

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