The price ceiling and price floor .
Explanation of Solution
The
The price floor is the minimum price that can be charged for the product in the market. This is to prevent the prices from going too low and making a loss to the producers and service providers. The most common price floor is the minimum wages set by the government. The laborers should be paid minimum wages when their service is rendered.
Similarly, the price ceiling is the maximum limit price that can be charged for a good or service in the market. This is to prevent the prices from going a lot higher and prevent the exploitation of consumers. The best given examples of the price ceiling includes the rent controls, price controls on gasoline in the 1970s, and the price ceilings on water during drought, and so forth.
Concept introduction:
Price floor: It is the minimum legal price set for a commodity or service by the government or the authority. This is to prevent the prices from going too low.
Price ceiling: It is the government-imposed maximum price that can be charged for a good or service in the market. This is imposed in order to prevent the prices from going very high.
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