PRICE CEILINGS & PRICE FLOORS
Welcome message from author
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
PRICE CEILINGS & PRICE FLOORS
Government Interference
Interfere with market
operations to protect
society or a part of society
from harm
Price Floor
Lowest legal price that can be charged
for a good or service
Meant to protect sellers if prices are too
low to cover costs
Price Floor
Price Floor
Examples:
Agriculture and Food Industry
milk
Price Floor
If there is a surplus, what can we do?
Distribution will be expensive process that will paid by the
taxpayer
Price Floor
How can we increase market equilibrium?
DEMAND
How?
Price Floor
How else can we increase market equilibrium?
SUPPLY
How?
Farm Conservation Subsidies
Reduce the surplus by paying
farmers NOT to produce product
Price Ceiling
Maximum legal price that can be
charged for a good or service
Meant to protect buyers if prices are too
high on products everyone needs
Price Ceiling
Price Ceiling
Examples:
Housing & Energy
Rent in NYC Gas Prices
Price Ceiling
If there is a shortage, what can we do?
Ration
Black Market
Long lines at the pump
Price Ceiling
After 9/11
Negotiations were made
to cap gas at $2.50 to
prevent price gouging
Price Ceiling
How can we decrease market equilibrium?
DEMAND
How?
Price Ceiling
How else can we decrease market equilibrium?
SUPPLY
How?
Related Documents
