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A price ceiling is the legal maximum price at which a good can be sold, while a price floor is the legal minimum price at which a good can be sold.

A price ceiling is only binding when the equilibrium price is above the price ceiling. The market price then equals the price ceiling and the quantity demanded exceeds the quantity supplied, creating a shortage of goods.

A price floor is only binding when the equilibrium price is below the price floor. The market price then equals the price floor and the quantity supplied exceeds the quantity demanded, creating a surplus of goods.

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Q: When are price ceilings and price floors binding?
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Related questions

Do producers tend to favor price floors or price ceilings?

price floors because, when binding, price floors increase price above the equilibrium and may increase producer surplus.


Why are price floors and price ceilings posed?

if the market price imposed by suppliers are too high for consumers then the price ceilings are imposed....if the market price is too low for the producers then price floors is imposed.


What do economists mean when they say that price floors and ceilings stifle the rationing function of prices and distort resource allocation?

When economist says price floors means above equilibrium and leads to undermanned surplus. When they say price ceilings it means price below equilibrium which leads to unsupplied shortage.


What happens when government imposes price ceilings and floors in a market?

efficiency


What is the impact on the economy if price ceiling or price floor were removed?

Price ceiling is government rules or laws setting price floors or ceilings that forbid the adjustment of price to clear markets. Price ceilings make it illegal for sellers to charge more than a specific maximum price. ceilings may be introduced when a shortage of a commodity threatens to raise its price a lot.


Are ceilings and floors vertical?

Ceilings and floors are generally horizontal relative to gravity, whereas walls are vertical.


What happens When the government intervenes in the market by imposing price ceilings and price floors?

Shortages, Surplus and Unintended consequences.


How did Romans attach the mosaics to the ceilings of their temples?

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What has the author Judson Mead written?

Judson. Mead has written: 'Walls, floors & ceilings' -- subject(s): Accessible book, Ceilings, Dwellings, Floors, Remodeling, Walls


What were mosaics used as?

They are used to decorate walls, floors, and ceilings.


How are mosaics used?

They are used to decorate walls, floors, and ceilings.


When the government intervenes in the market by imposing price ceilings and price floors what occurs?

Price ceiling are maximum price for a particular good or service, usually by the government. If price ceiling is placed below an equilibrium price (set by the supply and demand of the market) there is a shortage since suppliers are not as willing to supply the goods while the consumers are willing to purchase more of the product. However, if the price ceiling is placed above an equilibrium price, it is considered non-binding and has no practical effect. Price floor works opposite of price ceiling and is a minimum price for a particular good or service. If price floor is placed above an equilibrium price there is a surplus. However, if the price ceiling is placed below an equilibrium price, it is considered non-binding and has no practical effect.