Question

Please discuss and elaborate on the price ceiling and price floor ? are they efficient? explain the consequences?

Answer 1

price ceiling and price floor

1]Price ceiling-A price ceiling is a government imposed price control when high price is charged for a product, or service. Governments use price ceilings to protect consumers from conditions that could make commodities expensive.This is done inorder to make things affordable and control inflation,but price ceiling comes with a set of ineffectiveness of its own Price ceilings prevent a price from rising above a certain level.A price ceiling set below the equilibrium price will result in quantity demanded exceeding quantity supplied, and excess demand or shortages will be the result.

2]Price floor-Price floor is a situation when the price charged is less than the equilibrium price determined by the market the government interfer to fix the price at a certain level below which the price is not allowed to drop . Price floor has been found to be of great importance in the labour-wage market,and also has been proved to be very beneficial to agriculture in agrarian dominated economies like india,where is unpredictable fluctuations in agro market is frequent.but price floor has certain consequenceses,  price floor  set above the equilibrium price will lead to quantity supplied exceeding quantity demanded, and excess supply or surpluses will result. Price floors and price ceilings often lead to unintended after effects.