Question

In: Economics

if the goal of price ceilings is to help the consumer, how does the responsiveness to...

if the goal of price ceilings is to help the consumer, how does the responsiveness to Price of producers affect how well this goal is achieved?

Solutions

Expert Solution

A price ceiling is a government- or group-imposed price control, or limit, on how high a price is charged for a product, commodity, or service. Governments use price ceilings to protect consumers from conditions that could make commodities prohibitively expensive. So when price ceiling is binding then it is a situation of shortage where demand exceeds supply, if the producers are responsive to the price then they will lower the supply as price is not attractive enough to produce more as a result they will supply less if they are more responsive to the price and the goal of the price ceiling (to protect consumers interest) will not be achieved.


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