1. Who is the winner and loser between consumer and producer, when the price floor is...

1. Who is the winner and loser between consumer and producer, when the price floor is implemented?

2. Who is the winner and loser between consumer and producer, when the price ceiling is implemented?

Solutions

Expert Solution

Producers are better off as a result of the binding price floor if the higher price (higher than equilibrium price) makes up for the lower quantity sold. Consumers are always worse off as a result of a binding price floor because they must pay more for a lower quantity.

Price ceilings prevent a price from rising above a certain level. When a price ceiling is set below the equilibrium price, quantity demanded will exceed quantity supplied, and excess demand or shortages will result. Price floors prevent a price from falling below a certain level. price ceiling help the consumers and worse off for producers

Rahul Sunny answered 1 year ago

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