With the aid of well-labeled diagrams, distinguish between price floors and price ceilings.

With the aid of well-labeled diagrams, distinguish between price floors and
price ceilings.

Answers

Price control takes two forms: Maximum price (price ceiling) and minimum price (price floor).
Price ceiling involves fixing prices below the market price aimed at protecting the low-income
consumers against excessively high market prices. It?s therefore the price above which the
government does not allow.
Price floor is where prices are fixed/set above the market prices to protect producers of certain
commodities (against low and unstable income) and low-paid workers (from unscrupulous
employers). Minimum price is thus the price below which the government does not allow.
This distinction can clearly be demonstrated by way of diagrams as shown below:


Where:
P: equilibrium price
Q: equilibrium
quanity Pmax: Maximum
price Pmin: Minimum price
PBM : Black Market price
Ep :Equilibrium point
Qs :quantity supplied
Qd :quantity demanded
SS: Supply curve
DD: Demand curve

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Wilfykil answered the question on February 4, 2019 at 11:43

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