Floor And Ceiling Economics

However economists question how beneficial.

Floor and ceiling economics. A price ceiling keeps a price from rising above a certain level the ceiling while a price floor keeps a price from falling below a certain level the floor. Price ceiling has been found to be of great importance in the house rent market. Price ceiling is a situation when the price charged is more than or less than the equilibrium price determined by market forces of demand and supply. The lower price will result is a shortage of supply and hence decreased sales.

A price ceiling can increase the economic surplus of consumers as it decreases economic surpluses for the producer. This is usually done to protect buyers and suppliers or manage scarce resources during difficult economic times. Price floors and price ceilings are government imposed minimums and maximums on the price of certain goods or services. This section uses the demand and supply framework to analyze price ceilings.