Floor And Ceiling Economics

This section uses the demand and supply framework to analyze price ceilings.

Floor and ceiling economics.

Price floors and price ceilings are government imposed minimums and maximums on the price of certain goods or services. 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. A price ceiling is essentially a type of price control price ceilings can be advantageous in allowing essentials to be affordable at least temporarily.

However economists question how beneficial. It has been found that higher price ceilings are ineffective. Price ceiling has been found to be of great importance in the house rent market. The next section discusses price floors.