What is the difference between a price floor and price ceiling? According to the laws of demand and supply and how market equilibrium, efficiency, and equity are reached, do attempts to repeal those laws and market results with price floors and price ceilings justify legislative bodies to implement price controls? A price floor will lead to a transfer of consumer surplus to producer surplus; a price ceiling will lead to a transfer of producer surplus to consumer surplus; both price regulations lead to deadweight losses, which is a loss of surplus to society. Why?
What is the difference between a price floor and price ceiling? According to the laws of demand and supply and how market equilibrium, efficiency, and equity are reached, do attempts to repeal those laws and market results with price floors and price ceilings justify legislative bodies to implement price controls? A price floor will lead to a transfer of consumer surplus to producer surplus; a price ceiling will lead to a transfer of producer surplus to consumer surplus; both price regulations lead to deadweight losses, which is a loss of surplus to society. Why?
Macroeconomics: Principles and Policy (MindTap Course List)
13th Edition
ISBN:9781305280601
Author:William J. Baumol, Alan S. Blinder
Publisher:William J. Baumol, Alan S. Blinder
Chapter4: Supply And Demand: An Initial Look
Section: Chapter Questions
Problem 6DQ
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