price ceiling and price floor

price ceiling and price floor

´╗┐Executive summary

The concept of this report is about marketing intervention, which is the price ceiling and price floors. Price ceiling is actually set below the equilibrium price by lowering the price of the goods so that consumers can be able to afford the goods, then price floors which is set above the equilibrium price by increasing the price of some goods in order to protect the interest of some certain producers, and also to see the efficiency and inefficiency of both the price ceiling and price floors. Efficiency which is the economics allocating there resources in a good manner for example government rent control policy and inefficiency, is when the resources are not proper allocated an its example which is the black market and then some graphs that represent the price ceiling and price floors with their explanations and then lastly the real world example of price ceiling and evaluating the effective policy.

Price ceiling and price floor are both price controls and also for government to interfere in the free market that changes the market equilibrium price.
Price ceiling basically happens when the government puts a legal limits on how high a product price can be and it also disallow prices to exceed a certain maximum that causes shortages in order to be affordable by the consumers, there will be a shortage of goods when ever the price is set below the market price, in this situation demand will be higher or supply will be shortage because consumers will be demanding for more goods due to the cheaper price of the goods, also if the net effect to consumer surplus then the demand curve will be relatively elastic and so the consumer surplus become positive. And again for price ceiling to be effective it has to be set below the natural market. (B.taylor 2006).

However, price floor is when the government set a minimum price for certain good and services which it been sold in an unfair market with a very low price even though the producers need some...

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