0
A price ceiling is the maximum amount that sellers can charge for a good or service (G/S). An example of this is rent in a large city like New York. Lets just say that the tenant can only charge $1500 a month for rent in one of his apartments (theoretically). This will cause a shortage in apartments because of the amount of people who can afford the rent, and the amount of tenants who take their apartments off of the market because they will actually lose money if they rent it out. With the lower monthly payments for rent, the tenants will be reluctant to make repairs on the apartment due to how much they actually receive. There will also be a rise in black market activity for apartments, the renter will pay extra for rent under the table.
Price Ceiling = Shortage, Decrease in Quality, Black Market Activity, and Discrimination
Wiki User
∙ 13y ago
Add your answer:
Earn +20 pts
Why the price ceilings reduce economic surplus?
Price ceilings mean that a supplier can not charge more than a certain price for a good. When the amount a supplier charges is higher than it's economic costs for producing, it is running an economic surplus. With a price ceiling, the supplier is usually being prevented from charging the amount that maximizes economic profits. This therefore would reduce its economic surplus relative to what it could be without the price ceiling in place.
What is the full economic price under a price ceiling of 3 when the market demand is Q60-6P and the market supply is Q4P?
qd= 8
How is a price floor different from a price ceiling?
Price floor is a minimum and price ceiling is a maximum.
Can economic analysis provide a final answer to the question of whether the government should intervene in markets by imposing price ceiling and price floors?
Economic analysis cannot provide such an answer because it seeks to address positive questions such as "what is."
A price ceiling is characterized by?
A price ceiling is characterized by a price set below the current market price.
Why the price ceilings reduce economic surplus?
Price ceilings mean that a supplier can not charge more than a certain price for a good. When the amount a supplier charges is higher than it's economic costs for producing, it is running an economic surplus. With a price ceiling, the supplier is usually being prevented from charging the amount that maximizes economic profits. This therefore would reduce its economic surplus relative to what it could be without the price ceiling in place.
What is the full economic price under a price ceiling of 3 when the market demand is Q60-6P and the market supply is Q4P?
qd= 8
What side effects occur when a price ceiling is imposed on hospitals and physicians?
people that are actually sick die
What are the effects that price ceiling can have on a product?
a price ceiling results in a shortage because quantity demanded exceeds quantity supplied. it can increase consumer surplus but producer surplus decreases by more causing a deadweight loss in the market.
How is a price floor different from a price ceiling?
Price floor is a minimum and price ceiling is a maximum.
How is floor price different from a price ceiling?
Price floor is a minimum and price ceiling is a maximum.
Can economic analysis provide a final answer to the question of whether the government should intervene in markets by imposing price ceiling and price floors?
Economic analysis cannot provide such an answer because it seeks to address positive questions such as "what is."
A price ceiling is characterized by?
A price ceiling is characterized by a price set below the current market price.
What are the importance of price ceiling?
A price ceiling is the legal maximum price that may be charged for a particular good or service.
When is price ceiling non-binding?
Binding Versus Non-Binding price ceilingsA price ceiling can be set above or below the free-market equilibrium price. For a price ceiling to be effective, it must differ from the free market price. In the graph at right, the supply and demand curves intersect to determine the free-market quantity and price. The dashed line represents a price ceiling set above the free-market price, called a non-binding price ceiling. In this case, the ceiling has no practical effect. The government has mandated a maximum price, but the market price is established well below that.In contrast, the solid green line is a price ceiling set below the free market price, called a binding price ceiling. In this case, the price ceiling has a measurable impact on the market.
What are the main effects of price ceiling and rationing?
The following are the main effects of price ceiling and rationing: 1. Beneficial for Poor Consumers: A well managed rationing system enables the poor section of the society to get the commodities which are in short supply. 2. Transfer of Resources: The price ceiling and rationing enable the government to transfer resources from the production of less important uses to more important uses. 3. Black Marketing: The worst effect of rationing is to encourage black marketing.
How does price ceilings affect supply and demand?
A price ceiling prevents a price from rising above the ceiling. It represents an upper limit on the price of something. If wheat has a price ceiling of $400 per metric tonne, $400 is the highest amount any what supplier can charge. If the market price for wheat is below the ceiling, say $200 in this example, then the ceiling has no effect on prices; the ceiling is not binding. If the market price is higher than the ceiling, supply and demand cannot reach equilibrium and there is a shortage in the commodity. Artificially low prices result in demand that exceeds supply. The price, however, remains stuck at the ceiling.
