Economics is the social science that analyzes the production, distribution, and consumption of goods and services.

Sunday 4 March 2012

Price Regulation



Maximum Price or Ceiling Price
Government imposed regulations that prevent prices from rising above a maximum level set by the government which can lead to shortage.A price ceiling is imposed by the government below the equilibrium price (market price). That price is not allowed to rise above this level. Although, it is allowed to fall below it..

Problem; emergence of black market
- Black market is where people ignore the government’s price and quantity controls and sell illegally at whatever price equates illegal demand and supply.
Minimum Price or Floor Price
Government imposed regulations that prevent price from falling below a minimum level set by the government which can lead to surplus. A price floor is imposed by the government above the equilibrium price (market price). That price is not allowed to fall below this level. Although, it is allowed to rise above it

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