Price Ceiling and Price Floor

Price Ceiling
A price ceiling is where the price is not allowed to rise to its equilibrium level. If the pricing authority considers that the equilibrium price of a good or service is too high, it can set a maximum ceiling price. This is usually done with the aim of benefitting the consumer.
(2 marks) Diagram – explained (3 marks)
Price Floor
A price floor is the situation where the price is not allowed to decrease below a certain level. It only keeps the price from falling, not from rising. If the pricing authority considers that the

equilibrium price of a good or service to be too low, it can set a minimum or price floor. This can be done to protect the incomes of producers



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