What are some pros and cons of price ceilings and price floors? And how can these impacts ones life?
What are some pros and cons of price ceilings and price floors? And how can these impacts ones life?
Before we move into the pros and cons for price ceiling and price floor, let us spend some time to understand these.
Price Ceiling refers to the maximum price set by the government for a particular commodity. This is done when the equilibrium price is too high.
Price Floor refers to the minimum price set by the government below which the prices should not fall. This is done when the equilibrium price is very low.
Pros and Cons of Price Ceiling.
Pros:
a) It ensures that the price does not go beyond a level which will hamper the welfare of the consumers
b) It will ensure healthy competition as those producers wanting to sell below the price ceiling will go out of the market
Cons:
a) It will drive a lot of sellers away.
b) The government does not take the producer\'s side into consideration.
Pros and Cons of Price Floor.
Pros:
a) It ensures that the price does not fall below a level which will hamper the welfare of the producers.
b) It will ensure that the producers receive what they'v...
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