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Loraine Loraine
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10 years ago
Compare and contrast a price ceiling and a price floor.
Textbook 
Essential Foundations of Economics

Essential Foundations of Economics


Edition: 7th
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Start by doing what's necessary; then do what's possible; and suddenly you are doing the impossible.

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9 years ago
  A price ceiling is the maximum legal price that may be charged. A price floor is the minimum legal price that may be charged. For a price ceiling or a price floor to have an effect, they must make the equilibrium price illegal. So, an effective price ceiling is set below the equilibrium price while an effective price floor is set above the equilibrium price. A price ceiling creates a shortage of the good while a price floor creates a surplus. Both create inefficiency because the marginal benefit of the last unit consumed no longer equals the marginal cost of the last unit produced.
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