Floor And Ceiling Economics

This section uses the demand and supply framework to analyze price ceilings.

Floor and ceiling economics.

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 price ceilings are government imposed minimums and maximums on the price of certain goods or services. However economists question how beneficial. The lower price will result is a shortage of supply and hence decreased sales.

This is usually done to protect buyers and suppliers or manage scarce resources during difficult economic times. The next section discusses price floors. A price ceiling keeps a price from rising above a certain level the ceiling while a price floor keeps a price from falling below a certain level the floor. Price ceiling has been found to be of great importance in the house rent market.