Define Price Floor And Ceiling

A price ceiling is the maximum price for a particular product or service.

Define price floor and ceiling. Price floors and price ceilings are similar in that both are forms of government pricing control. Price floors prevent a price from falling below a certain level. The opposite of a price ceiling is a price floor which sets a minimum price at which a product or service can be sold. It is legal minimum price set by the government on particular goods and services in order to prevent producers from being paid very less price.

The price floor definition in economics is the minimum price allowed for a particular good or service. Price ceiling example for example price ceiling occurs in rent controls in many cities where the rent is decided by the governmental agencies. Price floors and price ceilings are government imposed minimums and maximums on the price of certain goods or services. This is usually done to protect buyers and suppliers or manage scarce resources during difficult economic times.

For example rent for an apartment. Like price ceiling price floor is also a measure of price control imposed by the government. Real life example of a price ceiling in the 1970s the u s. Price ceilings prevent a price from rising above a certain level.

These price controls are legal restrictions on how high or how low a market price can go. This section uses the demand and supply framework to analyze price ceilings. When a price ceiling is set below the equilibrium price quantity demanded will exceed quantity supplied and excess demand or shortages will result. What is price floor.

The next section discusses price floors. The price floor is the minimum price. See full answer below.