Flip It Price Ceilings and Price Floors Notes - \u25cf \u25cf Price Ceilings sets a maximum level or ceiling on the price of a good or service \u25cb Creates a

Flip It Price Ceilings and Price Floors Notes - u25cf...

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Price Ceilings - sets a maximum level, or ceiling, on the price of a good or service Creates a shortage of the good Price ceilings in any market lead to shortages and create inefficiencies because they reduce the incentive for the seller to provide the good or service Those people who are able to consume the good or service benefit, but the others miss out because of the shortage created Price ceilings below equilibrium are called binding price ceilings Would cause quantity demanded at the lower price to exceed the quantity supplied, resulting in a shortage of the good or service Price Floors - sets a minimum level, or floor, on the price of a good or service Some sellers who are lucky enough to find buyers will benefit from selling their milk at higher prices, many others would not be able to sell their milk at all because there are too many buyers for all the supply at that price Does not increase the sale of milk Instead reduces the quantity sold and leads to a surplus of milk Lead to surpluses and create inefficiencies by reducing the incentives to produce the good or service Price floors set above equilibrium are called binding price floors Create surpluses in markets

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